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Bitcoin Holds Support; Approaching $50K Resistance

5 years 2 months ago

Bitcoin (BTC) is holding support above $42,000 and could face resistance near $50,000 as short-term momentum behind the short-squeeze rally fades. The cryptocurrency was trading around $47,400 at press time and is up 3% over the past 24 hours.

The short-term uptrend remains intact despite several overbought pullbacks that were resolved to the upside. Bitcoin remains in breakout mode after rallying past $42,000, which marked the completion of a two-month consolidation phase.  

  • The relative strength index (RSI) on the four-hour chart is near overbought levels, which typically precede brief pullbacks. The last extreme overbought reading on July 26 occurred before a 10% pullback.
  • Bitcoin has maintained a series of higher price highs since the August 6 breakout above $42,000. This means buyers continue to defend support levels as the broader uptrend improves.
  • The weekly chart has positive momentum signals similar to the start of a crypto rally around November 2020.
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Huobi Revenue Took a Hit in July, Token Burn Suggests

5 years 2 months ago

The amount of Huobi Token that Huobi Global burned in July indicates the crypto exchange’s revenue probably fell last month.

  • The total value of HT burned dropped 54% from June to $22.3 million, the exchange said. 
  • The burn is positively correlated to revenue, so a decrease in burned tokens indicates a fall in revenue. Token burning is a process by which crypto coins are taken out of circulation, often aimed at keeping inflation low.
  • Huobi burns 15% of its revenue, and allocates another 5% of total income to repurchase and burn a portion of HT Team Incentive Rewards, a spokesperson told CoinDesk via WeChat.
  • The decline is a “natural response” to market trends, the Huobi spokesperson said. Trading volumes have decreased throughout the industry in the last month because of regulatory actions, they said.
  • Factors other than revenue, such as token price, could also affect the burn, Wayne Zhao, a partner at Beijing-based crypto analytics firm TokenInsight, told CoinDesk.
  • Huobi’s token burn had been increasing since March until it reached $138.579 million in May, and then started dropping. Chinese authorities started a harsh crackdown on the domestic crypto industry in May.
  • The exchange dissolved a Beijing entity in late July, claiming it was a defunct corporate entity that was not in use.
  • TokenInsight estimated Huobi’s spot trading volume at $1.16 trillion in the second quarter, beaten only by Binance’s $3.57 trillion. OKEx was third with $877 billion.

CORRECTION (AUG 16, 11:34 UTC): Clarified that the change was in total burned total, not burn rate.

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Cryptocurrency Market Tops $2T for First Time Since May

5 years 2 months ago

The crypto market cap surpassed $2 trillion for the first time since mid-May as bitcoin led the rally, according to CoinMarketCap data.

  • Bitcoin climbed up to $48,048 early Monday, the highest level since May 17, CoinDesk data show.
  • The world’s largest cryptocurrency is joined by ether and cardano, which have surged 11% and 53% in the last seven days respectively.
  • The crypto market cap sank as low as $1.19 trillion on July 20, according to data from CoinMarketCap, meaning the sector has almost doubled in value in less than a month.
  • After a touching a peak of more than $2.5 trillion on May 12, crypto pulled back and saw a couple of months of downward pressure as the mining crackdown in China took hold.
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Biden Administration to Pick Acting Chairman Rostin Behnam to Head CFTC: Report

5 years 2 months ago

U.S. President Joe Biden’s administration reportedly plans to nominate Rostin Behnam, acting chairman of the Commodity and Futures Trading Commission (CFTC), to lead the regulator.

  • Bloomberg reported Friday Behnam has been selected to lead as the regulator’s chairman, according to unnamed sources close to the matter.
  • While an announcement might be weeks away, the White House’s selection is a continuation of Behnam’s role as acting chairman, which began in January.
  • The regulator is charged with overseeing derivatives market activity including cryptocurrency derivatives.
  • In July 2017, former U.S. President Donald Trump nominated Behnam as a commissioner of the CFTC. He was confirmed two months later.
  • Behnam has spoken favorably on the use of blockchain technology in financial markets and previously called for an “open mind” on regulation in the fintech space.
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Singapore Crypto Owners Are More Likely to Hold Ether Than Bitcoin

5 years 2 months ago

Ether is the most popular cryptocurrency in Singapore, a survey published Monday found.

  • Almost four-fifths of crypto investors, 78%, hold ether compared with 69% who own bitcoin, according to a survey by crypto exchange Gemini, finance platform Seedly, and information provider CoinMarketCap. Cardano came third at 40%.
  • The survey of over 4,000 adults conducted June 29-July 9 also found that 67% of respondents with personal investments have crypto in their portfolio, and two-thirds of the crypto holders increased their digital-asset holdings during the pandemic.
  • Of those who haven’t invested in crypto, more than two-thirds cited lack of knowledge. Perceived market volatility also played a part in the decision.
  • Still, 34% of respondents who don’t own crypto said they plan to enter the market within the next 12 months
  • The most interesting aspect of crypto to all responders was decentralized finance, followed by crypto as an inflation hedge and non-fungible tokens.
  • Around 80% of crypto owners in Singapore are men and under 34, the survey found.
  • Women who own crypto have a higher median income than their male counterparts.
  • While 64% of all crypto holders have more than 5% of their portfolio in digital assets, a full fifth of those aged 18-24 said more than half of their investments are in crypto.
  • Singapore is emerging as Asia’s crypto hub, in part due to favorable regulation.

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Retail Giant Walmart Seeking to Hire Digital, Cryptocurrency Lead

5 years 2 months ago

Walmart, the largest U.S. retailer by total sales, is looking to hire a digital currency and cryptocurrency product lead.

  • According to the retailer’s careers page, the new role seeks to provide leadership with ways to identify technology and customer trends.
  • Investments needed to build on those existing trends will also be advised by the Bentonville, Ark.-based crypto product lead.
  • Part of the role’s remit includes driving the retail giant’s digital currency strategy.
  • Identifying crypto-related partnerships and investments will also be part of the role.
  • Two years ago, Walmart applied for a patent on a price-stable crypto similar to Facebook’s nascent project, then called Libra.
  • Walmart has also experimented with distributed ledger technology for nonfinancial uses such as tracking drugs and food along the supply chain.
  • Earlier this year, Walmart created a fintech unit called Hazel. The move signaled the big-box retailer has not lost its appetite for a piece of the consumer finance pie since its unsuccessful attempt to get a U.S. bank charter in the early 2000s.

UPDATE (Aug. 16, 2021, 00:43 UTC): Adds background on Walmart’s related moves.

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What Does Liquidation Mean and How to Avoid It?

5 years 2 months ago

The crypto market’s high volatility means liquidations are a common occurrence.

Bitcoin and other cryptocurrencies are renowned for being high-risk investments prone to extreme price swings. But while this volatility makes them a concern for regulators, it also presents an opportunity for investors to generate significant profits, particularly when compared to traditional asset classes like stocks and commodities. Over 2020, amid the coronavirus outbreak, bitcoin ended the year up 160% versus the S&P 500 at 14% and gold up 22%. 

Adding to this volatility is the potential to increase the size of crypto trading positions through the use of derivatives products like margin trading, perpetual swaps and futures. Derivatives are contracts based on the price of an underlying asset and allow people to bet on the asset’s future price. Crypto derivatives first appeared in 2011 and have gathered huge momentum in more recent years, especially among gung-ho retail investors looking to get the most out of their trading strategies. 

Related: How Does Ethereum Staking Work?

With margin trading, traders can increase their earning potential by using borrowed funds from a cryptocurrency exchange. Binance, Huobi and Bitmex are some of the leading examples of centralized crypto exchanges that allow customers to trade on margin. 

But there’s something very important to note here. While borrowing funds to increase your trade positions can amplify any potential gains, you can also lose your invested capital just as easily, making this type of trading a two-edged sword.

What is margin trading?

Margin trading involves increasing the amount of money you have to trade with by borrowing third-party funds. Think of it as borrowing money from a stranger to buy bitcoin or another cryptocurrency. But in this case, you are borrowing from a crypto exchange. This allows investors to increase the size of their trading positions, also known as “leverage.”

Naturally, a stranger would not lend you money to trade for free. Similarly, in margin trading, the exchange will require you to put up an amount of crypto or fiat as collateral – known as an “initial margin” – in order to open a trading position. This initial margin is like an insurance fund for the exchange in case the trade goes against the borrower.

Related: A Crypto Guide to the Metaverse

It is also worth mentioning that the amount of money you can borrow from an exchange relative to your initial margin is determined by the leverage. For example, if you use a 5x leverage on an initial margin of $100, you will be taking a $400 loan to increase your trading position from $100 to $500.

Each trade has the potential to make or lose more money depending on the size of the leverage. For instance, using the 5x leverage example above, if the price of an asset rises by 10%, you will make a profit of $50 on your $500 trading position, which represents a 50% profit relative to your initial $100 margin. You could then repay the $400 loan you took out and keep $150 for yourself ($50 profit + $100 initial margin.) 

However, if the value of the cryptocurrency you’re trading drops by 10%, you would have lost $50 from your initial margin (50% loss.)

There is a simple formula to calculate your potential profits/losses when using leverage.

Profit or Loss = (Initial Margin) x (% price movement) x (leverage)

For clarity, use “plus” to represent positive price movements and “minus” for negative price movements. In general, remember that leverage is how much your initial margin can gain OR lose. Ensure you keep your potential losses to manageable levels.

What is liquidation?

In the context of cryptocurrency markets, liquidation refers to when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. It happens when a trader is unable to meet the margin requirements for a leveraged position (fails to have sufficient funds to keep the trade open.) Liquidation occurs in both margin and futures trading.

Trading with a leveraged position is a high-risk strategy, and it is possible to lose your entire collateral (initial margin) if the market makes a large enough move against your leveraged position. In fact, some countries like the United Kingdom consider it so risky it has banned crypto exchanges from offering retail investors leveraged trading products to protect novice traders from being liquidated and losing all their invested capital.

You can keep track of the percentage the market needs to move against your position it to be liquidated by using this formula:

Liquidation % = 100 / Leverage

For instance, if you use 5x leverage, your position will be liquidated if the price of an asset moves 20% against your position (100/5 = 20.) 

How to avoid liquidation

When using leverage, there are a handful of options available to mitigate the chances of being liquidated. One of these options is known as a “stop loss.”

A stop-loss, otherwise known as a “stop order” or “stop-market order” is an advanced order that an investor places on a crypto exchange, instructing the exchange to sell an asset when it reaches a particular price point. 

When setting up a stop loss, you will need to input:

  • Stop price: The price where the stop loss order will execute
  • Sell price: The price at which you plan to sell a particular crypto asset
  • Size: How much of a particular asset you plan to sell

If the market price reaches your stop price, the stop order automatically executes and sells the asset at whichever price and amount stated. If the trader feels the market could move quickly against them, they might choose to set the sell price lower than the stop price so it’s more likely to get filled (bought by another trader.)

The primary purpose of a stop loss is to limit potential losses. To put things in perspective, let’s consider two scenarios. 

Scenario 1: A trader has $5,000 in his account but decides to use an initial margin of $100 and leverage of 10x to create a position of $1,000. He places a stop loss at 2.5% from his entry position. In this instance, the trader could potentially lose $25 in this trade, which is a mere 0.5% of his entire account size.

If the trader does not use a stop loss, his position will be liquidated if there is a 10% drop in the price of the asset. Remember the liquidation formula above.

Scenario 2: Another trader has $5,000 in his trading account but uses an initial margin of $2,500 and a 3x leverage to create a position of $7,500. By placing a stop loss at 2.5% away from his entry position, the trader could lose $187.5 in this trade, a 3.75% loss from their account.

The lesson here is that while using higher leverage is typically considered very risky, this factor becomes very important if your position size is too large, as seen in the second scenario. As a rule of thumb, try to keep your losses per trade at less than 1.5% of your entire account size.

Where to set a stop loss

When it comes to margin trading, risk management is arguably the most important lesson. Your primary goal should be to keep losses at a minimum level even before thinking about profits. No trading model is infallible. Therefore, you must deploy mechanisms to help you survive when the market doesn’t go as expected.

Placing stop losses correctly is vitally important, and while there is no golden rule for setting a stop loss, a spread of 2%-5% of your trade size is often recommended. Alternatively, some traders prefer to set stop losses just below the most recent swing low (provided it’s not so low you’d stand to be liquidated before it triggered).

Secondly, you should manage your trading size and the associated risk. The higher your leverage, the higher your chances of being liquidated. Using excessive leverage is akin to exposing your capital to unnecessary risk. Moreover, some exchanges manage liquidations aggressively. BitMEX, for example, only allows traders to hold BTC as initial margin. This means if bitcoin’s price falls, so too does the amount of funds held in collateral resulting in faster liquidations.

Due to the risk associated with leverage trading, some exchanges have moved to lower the limit traders can access. Both Binance and FTX are among the leading centralized crypto exchanges to slash leverage limits from 100x to 20x.

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Market Wrap: Ethereum Keeps Burning and Price Is Hot

5 years 2 months ago

Bitcoin’s price rose Friday, back above $46,000 after dipping as low as $43,800 the prior day. 

The largest cryptocurrency by market value was trading close to its highest level in more than two months, sitting on a 60% year-to-date gain after rallying from a low around $29,000 as recently as June. 

A key threshold is the 200-day moving average of the price, currently around $45,000. 

Related: Cardano Jumps on Signals Smart Contracts Coming Next Month

“The 200-day moving average is pivotal in the day trader’s mind,” Matt Blom, head of trading for the digital-asset firm Eqonex, wrote in his daily newsletter. “A deeper dip to $40,900 will signal that the market is shaping up to form a new trading range, with $41,000 and $46,000 as the key levels.”    

Latest prices

Cryptocurrencies:

  • Bitcoin (BTC) $46,847, +4.83%
  • Ether (ETH)  $3,224.2, +5.66%

Traditional markets:

  • S&P 500: 4468.1, +0.2%
  • Gold: $1778.3, +1.46%
  • 10-year Treasury yield closed at 1.294%, compared with 1.369% on Thursday
What lies ahead? 

In an interview this week, Blom said the $50,000 price level may prove more difficult for bitcoin to break through than when the cryptocurrency soared past that level earlier this year en route to the all-time high price close to $65,000. 

Related: Dolce & Gabbana Sets Date for Haute Couture NFT Drop

That’s partly because some long-time bitcoin investors who missed the opportunity to take profits during that early-2021 rally might choose to do so once the key psychological hurdle of $50,000 is reached, Blom predicts. Such selling might “limit the upside for several weeks,” Blom said. 

“As soon as we get to $50K, I think we’re going to churn,” Blom said. “People are going to take some coins off. I don’t care how much of a HODLer you are.” In crypto-trading jargon, a HODLer is an investor who buys tokens under a plan to hold them for a long time.     

Cardano announces September release date for ‘Alonzo’ upgrade

Cardano (ADA) jumped past $2 for the first time in nearly three months as the blockchain’s chief developer announced a September release date for the planned “Alonzo” upgrade – a move that would usher in smart-contract functionality and thus address what critics have described as one of the network’s most glaring deficiencies.

​​Smart-contract functionality would allow Cardano to incorporate more applications including so-called decentralized finance (DeFi) platforms that allow for automated cryptocurrency lending and trading. The improvement could put the network in a better position to challenge Ethereum, currently the leader among blockchains with smart-contract functionality.

The ADA price reached $2.08 at 9:05 UTC Friday, the highest since mid-May, when ADA was trading at $2.31 at its all-time high. Over the past 24 hours it’s up 16%. The recent price rally has pushed cardano’s market capitalization to about $65 billion, vying with binance coin (BNB) and tether (USDT) for the No. 3 rank among all cryptocurrencies by market value after No. 1 bitcoin and No. 2 ether.

Ethereum keeps burning and price is hot 

Ether traders are acutely focused on data from the underlying Ethereum blockchain’s recent upgrade, known as the London hard fork – and the potential for the refresh to reduce the cryptocurrency’s supply growth.

Under Ethereum Improvement Proposal 1559, a component of the London upgrade that’s usually shorthanded as just EIP 1559, base fees paid to transact on the blockchain get “burned,” meaning they offset some of the 2 ETH created as miner rewards with each data block.

As of press time, some 38,261 ETH have been burned in accordance with EIP 1559, according to the website Watch the Burn. The amount represents more than $120 million, and has reduced the net issuance of new ether by an estimated 35%.

The big question is whether institutional investors who are creeping into digital-asset markets might start to see ether as an inflation-resistant asset, similar to the way many bitcoin bulls have cast that cryptocurrency.

As bitcoin has rallied 16% in August, ether has outperformed with a 26% gain. On a year-to-date basis, ether has quadrupled in price while bitcoin is up 58%. 

FundStrat, the investment-research firm, wrote this week: “We expect fees moving through the platform to increase concurrent with the recent uptick in market activity and consequently should continue to see further disinflationary and perhaps even deflationary effects on Ethereum’s circulating supply, resulting in positive price performance.”

It’s notable that Mike McGlone, the Bloomberg Intelligence analyst who won big plaudits for his (ultimately) accurate call last year that bitcoin would hit $50,000, raised the possibility in a report this week that ether might eventually challenge the larger cryptocurrency for the top spot in the rankings of digital assets by market capitalization. 

Crypto insiders often refer to that imagined change in the leaderboard as the “flippening.”     

“There appears little can stop the process of ethereum ‘flippening’ to take the top spot by market cap, even it takes years rather than months at current trajectories,” McGlone wrote. “Ethereum appears on an enduring path as the go-to platform for the crypto ecosystem and decentralization of finance akin to Amazon Inc. and e-commerce.”

Poly Network exploit update 

The drama around the largest hack in decentralized finance (DeFi) history appears to be coming to an end after the attacker returned most of the stolen funds to a multisig wallet set up by Poly Network, with the exception of the $33 million worth of tether that was frozen by Tether, CoinDesk’s Muyao Shen reports. 

“What crypto investors and regulators should be concerned about here is that this wasn’t a hack in the traditional sense, where someone gains unauthorised access,” wrote David Janczewski, co-founder and CEO at crypto security company Coincover in an email. 

“This appears to have been an exploit, where a user runs public code to take advantage of an undiscovered security issue,” Janczewski wrote. “This type of exploit certainly won’t be the last as funds deposited into smart contracts like this are always exposed to risks associated with how those smart contracts are coded.”

Altcoin roundup:
  • Polygon Merges With Hermez Network: Polygon, a layer 2 platform on the Ethereum blockchain, is merging with rollup platform Hermez Network in a 250 million MATIC deal. The acquisition was worth about $250 million based on MATIC’s price on Aug. 4, when the deal was struck. Hermez will be absorbed into the Polygon ecosystem under the name Polygon Hermez, where it will become a part of Polygon’s line of products, including Polygon SDK and Polygon Avail. The entire Hermez project – its employees, technology and native HEZ token (which holders will be able to exchange at a rate of 3.5 MATIC: 1 HEZ) – will be integrated into Polygon’s platform. Polygon’s merger with Hermez is the first complete merger of one blockchain network into another.
  • Kaszek Makes First DeFi Investment: Kaszek, a leading Latin American venture capital fund, made its first decentralized finance (DeFi) investment, leading a $3 million round in Exactly, a startup that is building an open-source, non-custodial credit protocol on the Ethereum platform. “We see a gigantic emerging opportunity in DeFi, which will change the financial landscape in unimaginable ways in the years to come,” Hernán Kazah, Kaszek’s co-founder and managing partner, said in a statement, adding that the investment is part of two recently raised funds totaling $1 billion. 
Relevant News Other markets

Most digital assets on CoinDesk 20 ended higher on Friday. In fact everything was in the green except for dollar-linked stablecoins.

Notable winners of 21:00 UTC (4:00 p.m. ET):

cardano (ADA) +12.85%

chainlink (LINK) +7.72%

polygon (MATIC) +7.65%

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IRS, in Boon to Crypto, Will Reportedly Ignore How Bill Defines Broker; Bitcoin Rises

5 years 2 months ago

Related: Pelosi Ally Asks US House Speaker to Modify Crypto Language in Infrastructure Bill

“A) a dealer, (B) a barter exchange, and (C) any other person who (for a consideration) regularly acts as a middleman with respect to property or services.”

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Chip Giant Intel Owns Coinbase Shares: Report

5 years 2 months ago

Chipmaker Intel disclosed on Friday it owns a 3,014-share stake in the cryptocurrency exchange Coinbase, according to an article in the business publication Barron’s.

  • The Santa Clara, Calif.-based company appears to have purchased the shares during its Q2 ending June 26, according to the story, which noted that Intel didn’t report owning shares prior to then.
  • Coinbase started trading publicly via a direct listing in April. Intel could have purchased the shares before then, as Barron’s noted that companies going public must only report stakes in themselves of at least 5%.
  • Based on Coinbase’s share price at the time of publication, the Intel stake would amount to a little under $800,000.
  • Intel had to report the shares because it owns over $100 million in publicly traded investments, Barron’s reported.
  • Coinbase reported strong second-quarter results on Tuesday, although it warned that customer activity would slow in the third quarter. 

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NYDFS Head Lacewell to Depart Agency by Month’s End

5 years 2 months ago

New York Department of Financial Services (NYDFS) Superintendent Linda Lacewell will leave the financial regulator on Aug. 24, she announced Friday.

Citing New York’s upcoming change in governorship, Lacewell said it was “time for me to move on and make way for new leadership.”

Current New York Governor Andrew Cuomo announced his resignation earlier this week, after an investigation by the New York Attorney General found he sexually harassed nearly a dozen women. New York’s Lt. Governor, Kathy Hochul, will take on the role after Cuomo formally steps down after next week.

Related: Money Reimagined: A Turning Point for Crypto

Lacewell has worked for Cuomo as his chief of staff and counselor, and Cuomo nominated the former prosecutor to head New York’s financial regulatory agency in 2019.

During her tenure at NYDFS, Lacewell revamped the agency’s crypto regulatory licensure, streamlining its efforts to license virtual currency companies in the state and making it somewhat easier for businesses to list different tokens for trading.

Businesses can partner with the State University of New York or an already-licensed exchange to try and secure a conditional BitLicense, while already-licensed businesses can self-certify cryptocurrencies maintained on the agency’s “green list.”

The rate of BitLicense approvals also increased in 2018 and 2019, as Lacewell took office.

Related: To Win in Washington, Crypto Needs a Campaign Strategy

“We modernized our approach to virtual currency business licensing and coin issuance, and we welcomed numerous new entrants, including global financial institutions. Responsible innovation is the key to building back better, and regulators have a responsibility to provide the regulatory guardrails and necessary guidance to protect both the emerging industry and consumers,” she said in a public note on Friday.

UPDATE (Aug. 13, 2021, 18:50 UTC): Adds additional context.

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Cardano Jumps on Signals Smart Contracts Coming Next Month

5 years 2 months ago

Cardano jumped past $2 for the first time in nearly three months as the blockchain’s chief developer announced a September release date for the planned “Alonzo” upgrade – a move that would usher in smart-contract functionality and thus address what critics have described as one of the network’s most glaring deficiencies.

Smart-contract functionality would allow Cardano to incorporate more applications including so-called decentralized finance (DeFi) platforms that allow for automated cryptocurrency lending and trading. The improvement could put the network in a better position to challenge Ethereum, currently the leader among blockchains with smart-contract functionality.

The ADA price reached $2.08 at 9:05 UTC Friday, the highest since mid-May, when ADA was trading at $2.31 at its all-time high. Over the past 24 hours, it’s up 16%. The recent price rally has pushed cardano’s market capitalization to about $65 billion, vying with binance coin (BNB) and tether (USDT) for the No. 3 rank among all cryptocurrencies by market value after No. 1 bitcoin (BTC) and No. 2 ether (ETH).

Related: Market Wrap: Ethereum Keeps Burning and Price Is Hot

Nigel Hemsley, head of delivery for Cardano, said in a video released by developer Input Output Friday that the platform would launch the Alonzo upgrade on “Monday, Sept. 12,” though a quick glance at the calendar shows that the date falls on a Sunday this year. The developer later tweeted again saying that the platform targeted simply “Sept. 12” for the upgrade.

Started by Ethereum co-founder Charles Hoskinson, Cardano is a blockchain that aims to compete with Ethereum and other decentralized application platforms but as an avowedly more scalable, secure and efficient alternative. 

“Any growth in the price of cryptocurrencies is either directly caused by positive news driving up sentiments among buyers or a growth in tandem with the overall market trend,” Yuri Mazur, head of data analytics at crypto trading platform CEX.IO broker, wrote via email. “Cardano’s highly anticipated Alonzo upgrade is also a good reason for investors to stack up the coin.”  

The optimism has also risen in a prediction market started in July that allows participants to bet on whether Cardano can release smart contract functionality by Oct. 1.  

Related: Ether Upside Strengthens Relative to Bitcoin

As of press time, the betting contract, which pays out $1 of the stablecoin USDC if Cardano succeeds in meeting the timeline, was trading at 85 cents. That’s up from 30 cents on July 18, when the market was first launched.

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Puerto Rico: una isla con impuestos bajos donde el ecosistema cripto prospera

5 years 2 months ago

La última media hora del viaje de regreso de Andrew Keys desde Manhattan a la oficina de ConsenSys en Brooklyn, Nueva York, fue una experiencia transformadora. El padre fundador de la blockchain Ethereum soñó con cómo la cadena de bloques podría mejorar el mundo —desde la digitalización del dinero hasta la descentralización de la web—, antes de salir de un vagón de metro en una mañana gris de invierno. Ahora prefiere llamar desde un paraíso tropical. 

Keys se mudó a Puerto Rico en enero de 2018, durante un punto álgido del anterior momento alcista del mercado cripto. Formó parte del grupo de primeros adoptantes de criptomonedas que buscaban aprovechar los generosos incentivos fiscales de la isla. Fue una tendencia que en su día simbolizó los excesos de la industria blockchain, un movimiento que se asentó durante el mercado bajista y que ahora está volviendo a aparecer.

Read this article in English.

Related: Living in Puerto Rico, Where the Taxes Are Low and Crypto Thrives

La razón es tan clara como las aguas de la isla: Puerto Rico es un paraíso fiscal. Eso es cierto para todo el mundo, pero el enfoque no intervencionista de ese territorio sobre las ganancias de capital, los ingresos y los impuestos a las empresas es justo lo que los pro-capitalistas y escépticos del estado buscan en una residencia. Llámelo simpatía por las criptomonedas, con la ventaja de poder conservar el pasaporte estadounidense.

La última avalancha de emigrantes cripto hacia la isla es la muestra de que el traslado significa un negocio. Pantera, uno de los fondos de cobertura más seguidos en el segmento cripto, se ha trasladado a San Juan. También lo han hecho CoinMint, un gran minero de bitcoins; SuperRare, una consolidada plataforma de tokens no fungibles (NFT); y la legendaria y poderosa pareja cripto conformada por Amanda y Sam Cassatt, ex-ejecutivos de ConsenSys convertidos en gurú del marketing e inversor de capital de riesgo, respectivamente.

Hay hombres de dinero, programadores freelance y quienes prueban suerte en el ultramoderno negocio de las apuestas de ETH. Coral DeFi —una plataforma de gestión de inversiones—, Dex Grid —una startup de energía descentralizada— y el protocolo de finanzas descentralizadas (DeFI) BarnBridge surgieron de la nada en Puerto Rico. 

Y son más que bienvenidos: en 2012 Puerto Rico aprobó dos leyes, la Ley 20 y la Ley 22, destinadas a atraer a empresarios y corporaciones. La Ley 20 estableció un impuesto del 4% para las empresas exportadoras de servicios —consultoría de blockchain, por ejemplo— desde la isla. 

Related: By Taxing Crypto, the US Government Has Accepted It’s Here to Stay

No obstante, la verdadera atracción es la Ley 22. Aunque oficialmente forma parte de Estados Unidos, la isla se ha aislado del código fiscal de ese país y exime a sus residentes de los impuestos sobre las ganancias de capital. Esto la convierte en el único lugar del territorio estadounidense en donde los ingresos por inversiones, intereses y dividendos no están sujetos a impuestos. Todo lo que hay que hacer es pasar 183 días al año en una isla conocida por sus playas blancas como perlas y sus rones oscuros (residir en un barco dentro de las aguas territoriales también sirve). 

“Yo no lo llamaría una laguna jurídica”, dijo Shehan Chandrasekera, contador público y cofundador de Column Tax. “No creo que sea algo oculto. Puerto Rico y otros paraísos fiscales son lugares comúnmente nombrados entre la comunidad de individuos de alto patrimonio.” 

Numerosas jurisdicciones —muchas de ellas paraísos tropicales— compiten por el tesoro ofreciendo impuestos bajos o nulos. Algunas, como El Salvador, atraen directamente a la comunidad bitcoin. Pero sólo Puerto Rico, que está más cerca de Caracas que de Miami, ofrece a los residentes una forma fácil de mantener la ciudadanía estadounidense. 

Eso no significa que se encuentren trajes deambulando por las orillas de arena: al fin y al cabo, se trata de cripto. Incluso cuando Keys tomaba el tren L llevaba vaqueros y camiseta. Pero el nuevo movimiento de inmigración está más orientado al sector corporativo que el anterior, aunque sólo sea como reacción ante las pasadas críticas de querer establecer en Puerto Rico una “isla de blockchain”.

Puertopia para siempre

En 2017 la exestrella infantil y candidato presidencial Brock Pierce presentó al mundo tanto la plataforma de contratos inteligentes EOS como la idea de una cripto-casa llamada “Puertopia.” Estos últimos planes llamaron la atención de los medios de comunicación, y por una buena razón: Pierce y su equipo compraron hoteles, iglesias e incluso un antiguo hospital infantil para albergar su entorno cripto. Existían planes para constituir una ciudad.

Aunque los ricos han explotado durante mucho tiempo el sistema de evasión de impuestos de Puerto Rico, fue Pierce quien realmente introdujo el concepto en el mundo cripto. “Brock sigue siendo el número uno, por la cantidad de gente que tiene en su red, la cantidad de viajes que hace y la influencia que tiene en la comunidad”, dijo por teléfono desde San Juan Pedro Rivera, fundador de Crypto Mondays. 

A cambio de pagar muy pocos impuestos, estos cripto-ricos —en su mayoría hombres, al menos— reinvertirían su capital en Puerto Rico. Ese siempre ha sido el objetivo implícito de cualquier política fiscal favorable a las empresas, y con Pierce se convirtió en una promesa explícita. Y se hizo aún más real tras el huracán María, que devastó la ya frágil economía e infraestructura de la isla.

Pierce, quien ha prometido donar su multimillonaria fortuna en parte para apoyar a la patria que ha elegido, lanzó esfuerzos de reconstrucción en la vida real y dentro de la cadena (on-chain). Es difícil juzgar el impacto de ese trabajo. Se gastó dinero real, pero no fue el renacimiento anunciado. (Pierce no respondió a las múltiples peticiones de comentarios para este reportaje).

Por supuesto, la grave recesión del mercado —y más tarde la pandemia mundial— desbarató muchos de los planes más descabellados de reconstrucción. Pero nunca estuvo claro qué significaba reinventar la economía digital de Puerto Rico. O si se quería. 

“La gente no tiene luz, electricidad, internet… sus techos tienen goteras”, dijo Rivera, quien emigró del Bronx en 2017. “No les importa el cripto, hermano”. 

Si la riqueza cripto tuvo algún efecto tangible en la recuperación de la isla, probablemente se hizo a nivel individual o fue demasiado local para ser notado, dijo. Rivera, por su parte, afirmó que ayudó a recaudar $27.000 para financiar el trabajo en el techo de Poet’s Passage, un lugar de referencia local donde se celebran reuniones semanales de cripto. Recientemente, cerró una ronda de financiación de $100.000 respaldada por la comunidad de Crypto Monday para regalar billetera precargadas con $10 en criptomonedas a miles de niños de la organización sin fines de lucro Boys & Girls Clubs.

“He visto un montón de puertorriqueños que han hecho dinero en cripto invirtiendo en ello”, dijo. ¿Pero qué ocurre con las empresas del sector y la creación de empleos bien remunerados para los habitantes de la isla? “Todavía no hemos sido capaces de hacer que eso florezca realmente”, dijo. 

Para algunos, el vaporware, la evasión de impuestos, la transformación de un monasterio en un hotel boutique, todo se resume en una cosa: la explotación. La intelectual y escritora canadiense de izquierdas Naomi Klein analizó la situación y la llamó “criptocolonialismo”; Jillian Crandall, investigadora del Instituto Politécnico Rensselaer, la calificó como una forma perversa del “capitalismo del desastre”. CoinDesk publicó un informe en el que se preguntaba si Puerto Rico podría sobrevivir a ser el “eterno patio de recreo”, la aproximada traducción al latín del término “Puertopia”.

“Si no fuera por el hecho de que Puerto Rico es un Estado Libre Asociado de Estados Unidos, el proyecto [Puertopia] se parecería de manera exacta al colonialismo: la política o práctica de adquirir el control político total o parcial de otro país, ocuparlo con colonos y explotarlo económicamente. Espera… No, en realidad sigue siendo colonialismo”, escribió Bailey Reutzel, de CoinDesk, en 2018. Es un legado difícil de superar. 

Creando una isla blockchain

Habían pasado cuatro semanas de unas vacaciones originariamente de una semana en el Caribe cuando Keiko Yoshino se dio cuenta de que no quería irse. Voló de vuelta a Washington, D.C., donde trabajaba en el sector público, para empacar sus pertenencias y atar cabos sueltos. Llegó a San Juan con dos maletas y un nuevo título: directora ejecutiva de la Asociación de Comercio de Blockchain en Puerto Rico. 

“Si me hubieras preguntado en diciembre, habría dicho: ‘Bitcoin, eso es como el dinero imaginario, ¿no?’”, dijo. Pero en Puerto Rico todo encajó, y se enamoró de la tecnología y de la isla. “Es un ambiente. Es la energía… Es muy distinto a lo que esperaba”, dijo. “Aquí es muy diferente. Valores diferentes, prioridades diferentes”. 

Yoshino no es la primera persona en la que se piensa cuando se habla de cripto y Puerto Rico. No es rica en criptomonedas y no está buscando crear un colectivo anarcocapitalista. Ayudó a fundar la asociación blockchain para apoyar a la comunidad cripto local y puso a trabajar sus años de experiencia en el gobierno. Paga sus cuentas, pero no se hace rica.

Pero eso no impide que la gente la ataque. “En el pasado estuve en las redes sociales: escribieron mal mi nombre, me llamaron una cripto colonizadora”, dijo. Como una recién llegada al sector, considera que la idea de que las startups de blockchain son usurpadoras malévolas es tan irrisoria como la de que van a revolucionar la isla en breve. 

“Esa idea está desconectada de la realidad”, dice. En su trabajo de día está organizando una conferencia para este invierno. Los fines de semana juega al voleibol. Mencionó a un miembro de la asociación, Raincoat: una empresa de seguros que está utilizando la tecnología blockchain para ayudar a desembolsar pagos de seguros después de huracanes. Desde su punto de vista, el programa de incentivos fiscales ha ayudado mucho al país, pero no todo el mundo está de acuerdo. 

“Es un poco enfermizo cómo las corporaciones que están allí para aprovechar el impuesto a la exportación del 4% no hacen absolutamente nada para mejorar la economía local”, dijo un trader de criptomonedas que se hace llamar “PVKT” en Reddit y pidió permanecer bajo su seudónimo. Se mudó allí en 2019, principalmente por los beneficios fiscales, antes de repatriarse. Viviendo en una ciudad turística dos años después del huracán María se enfrentó a apagones itinerantes que “no eran muy propicios para el comercio”.  

También estaba la pobreza extrema que se veía: las casas de hormigón, las infraestructuras en ruinas, la falta de agua o de servicios básicos. Era difícil cuadrar su estilo de vida y el de quienes le rodeaban con la experiencia de la población local. “Se cambia mucho por los incentivos. Si lo único que te preocupa es el dinero y nada más, entonces puede que te convenga”, dijo PVKT. 

JSON, un usuario de Twitter con ese seudónimo, también planeaba mudarse a Puerto Rico antes de enfrentarse a un dilema moral similar. “Cuando lo analizo en profundidad, hay muchas cosas que no son deseables. La gente rica se muda allí pero hace poco para contribuir a la economía local. La gente de la isla es muy amable, pero algunos sienten que se aprovechan de ellos”, dijo. 

Si existe una comunidad cripto en Puerto Rico, es probable que se haya desarrollado debido al principio de proximidad. La mayoría de los cripto expatriados con los que hablé vivían en los mismos barrios de San Juan o Dorado, un enclave costero rico. Hay restaurantes de categoría mundial en donde los anfitriones hablan inglés y colegios privados a los que enviar a sus hijos. 

“Lo que ocurre es que hay una gran concentración de estas personas en zonas pequeñas”, dijo Rivera. Aunque vive en un barrio mayoritariamente hispanohablante, prefiere relacionarse con la clase alta. “Todos vamos a los mismos sitios. No hay tantos lugares de alto nivel en Puerto Rico”.

Eso no es necesariamente algo malo: aunque los ricos se libren de pagar impuestos sobre las plusvalías, siguen contribuyendo al Estado. Keys señaló que paga el impuesto de sociedades, el impuesto sobre la propiedad y el impuesto sobre las ventas. “Hay infinidad de impuestos que la gente seguirá teniendo que pagar. Aunque potencialmente más bajos”, dijo. 

A veces, los expatriados se han enfrentado a más presión por su decisión de mudarse a Puerto Rico que por apostar por el dinero descentralizado de internet. Pero, en cierto sentido, mudarse al extranjero para escapar de la carga fiscal es similar a salirse del sistema monetario actual a través de las criptomonedas. Ambas son formas de dejar atrás al estado e intentar construir un sistema alternativo. 

“Nadie va a pagar todos esos impuestos”, dijo Rivera sobre la factura fiscal comparativamente alta que le esperaba si se hubiera quedado en el Bronx. “Si tienes la oportunidad de no pagar, no es que nuestro gobierno necesite el dinero, hermano. Pueden imprimir dinero cuando quieran”.

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Founder of Alleged $95M Ponzi Nabbed in Russia, 3 More Sought

5 years 2 months ago

Russian police officials are investigating one of the biggest alleged Ponzi schemes in the country involving cryptocurrency. One of the founders is under arrest, while others have reportedly left Russia. Victims’ losses might be up to $95 million.

The company, named Finiko, offered lucrative investment options using a network of promoters who pulled in new users for referral fees. Investors were supposed to put in bitcoin and get the native token of Finiko in return.

In July, Kirill Doronin, one of founders of Finiko, was arrested under fraud charges. Before the arrest, he obtained Turkish citizenship under a different name, Onur Namik. On Wednesday, Finiko’s other co-founders – Marat and Edward Sabirov and Zygmunt Zygmuntovich – were put on a wanted list by the Russian police.  

Related: Russia’s Financial Monitoring Agency Wants to Identify and Profile Crypto Users

Edward Sabirov was also a co-founder of a firm led by Nikolay Nikiforov, a former Russian minister of communications, which planned to build homes in Kazan, the city where Finiko was founded. Now, other partners are trying to expel Sabirov from the owners’ list by court action, according to data in the Russian arbitration court system. 

About 100 people reported Finiko to the police, officials said, and the amount of claims totaled to around 70 million Russian rubles, or slightly less than $1 million. However, Russian business publication The Bell cited an anonymous source at the Bank of Russia that said Finiko might have accumulated up to 7 billion rubles, or close to $95 million. 

Money siphoned out

Finiko operated between 2019 and 2021, offering investment opportunities via crypto, including a deposit service with 20-30% APY (annual percentage yield), The Bell wrote. Clients invested in bitcoin, which Finiko exchanged for its native token. 

In June, Russian crypto new outlet Forklog reported that Finiko halted bitcoin withdrawals from its website, only allowing users to take out the native token FNK, which lost 97% of its value in three weeks.

Related: Russia’s Telecom Giant MTS Invests $11.7M in Blockchain Trade-Finance Service: Report

Then, in July, Finiko stopped all withdrawals, Forklog reported, demanding that users first submit a package of documents, including their income reports, reports on the banking transactions for one year, a confirmation of tax payment for the previous year and a “recommendation letter” from their bank, among others. 

The Bank of Russia put Finiko on the list of entities that “have signs of a Ponzi scheme.” 

Sergey Mendeleev, founder of crypto exchange Garantex, believes that Finiko’s founders might have stolen even bigger amounts of money than The Bell reported, perhaps up to $1 billion. 

“In January, the entire Moscow [crypto market] was on fire when Finiko cashed out about $100 million in just one week,” Mendeleev said. 

He also pointed to a particular transaction of 1,023 BTC, which was sent, reportedly, from Finiko’s wallet in December. 

“There was a scandal, of course, as people are not crazy about dealing with Ponzi money,” Mendeleev said. “But then it somehow calmed down. You can’t always tell whose money you’re dealing with, and Finiko’s bitcoin still hasn’t been labeled as scam funds [by blockchain tracing systems].” 

Most people got involved in Finiko by word of mouth from their friends and relatives, who reaped generous referral fees for that, The Bell wrote. The same people who referred their friends might have been helping them buy crypto for the first time to invest in a lucrative venture, Mendeleev said.

Russian-language crypto Telegram channel Ghost_In_The_Block wrote in July about identifying Finiko’s crypto addresses. According to the summary published by the anonymous authors, Finiko’s USDT wallet processed more than 400 million USDT. 

Blockchain analytics firm Crystal Blockchain identified 1.8 million USDC, 111.3 million USDT and 888 ETH tied to Finiko’s digital wallets, as well as 110 million native tokens. Kyrylo Chykhradze, product director at Crystal Blockchain, told CoinDesk that the funds were partially sent to the decentralized exchange Uniswap, as well as to some centralized exchanges.

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Dolce & Gabbana Sets Date for Haute Couture NFT Drop

5 years 2 months ago

Italian haute couture fashion label Dolce & Gabbana will debut its non-fungible token (NFT) collection on the luxury marketplace UNXD later this month in a bid to “bridge the physical with the metaphysical.” UNXD is built on Polygon, the layer 2 network meant to offer cheaper transactions than the Ethereum mainnet.

“Collezione Genesi” NFTs will feature items personally designed by Dolce & Gabbana co-founders Domenico Dolce and Stefano Gabbana. 

This will mark the iconic brand’s first foray into the NFT market. The collection will launch publicly on Aug. 28 at the start of Dolce & Gabbana’s Alta Moda couture show in Venice, with the official auction going live Sept. 6.

Related: Market Wrap: Ethereum Keeps Burning and Price Is Hot

Luxury culture is about flaunting expensive items and it is no surprise high-end fashion brands have jumped on the bandwagon as NFTs surge back into the mainstream.

Speaking during a Twitter Spaces livestream Friday, UNXD CEO Shashi Menon said:

“We have a very deep relationship with the house of Dolce & Gabbana and have been working with them for many years. When we proposed the idea to them, we were really enthused by how the team was taken by it. What is important here is that fashion is fundamentally an artistic medium.”

The Venetian-themed Collezione Genesi NFTs will be showcased at upcoming fashion shows Alta Moda, Alta Sartoria and Alta Gioiellleria. The first concept to be highlighted is called “Dress from a Dream.”

Related: Polygon Merges With Hermez Network in $250M Deal

“With this collection, Dolce & Gabbana [is] creating NFTs that bridge their creative work from the physical to the metaphysical,” said UNXD COO Nick Gonzalez. “This will pave the path for more brands to join the space as they see the power of digital ownership to create opportunities that align with their underlying ethos and core brand and business.” 

Earlier this month, the British luxury fashion brand Burberry launched its NFT collection in partnership with Mythical Games. The Burberry NFTs featured items via Blankos Block Party, a game with digital vinyl toys known as Blankos that live on the blockchain.

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Israeli Financial Authorities Double Down on Bitcoin-Linked Investments: Report

5 years 2 months ago

Israel’s Capital Market, Insurance and Savings Authority is requiring insurance companies and investment houses to detail and justify any investments linked to bitcoin, according to Israeli business publication Calcalist. 

In a letter sent on Wednesday to institutions under its supervision, the authority called bitcoin a speculative asset with no intrinsic value, Calcalist reported. 

According to Calcalist, Wednesday’s letter was issued in response to (and only a day after) digital currency investment house Silver Castle and the Tel Aviv Stock Exchange (TASE) announced the country’s first bitcoin-linked bonds will trade on TASE UP, the exchange’s trading platform for private companies. 

Related: Bitcoin Development Boost: FTX Is Donating $450K to Brink

Financial authorities in the country have been tightening regulations around crypto. At the end of July, the Ministry of Finance introduced a bill that would require all crypto holdings worth $61,000 or more be reported to the tax authority. A recently released report by the Justice Department said a new anti-money laundering order that also applies to virtual currency service providers will come into effect in November. Financial regulators, including the Capital Market Authority, were involved in preparing the legislation, the Justice Department report said. 

In its announcement, TASE said the new bonds will expose institutional investors to bitcoin “with significantly reduced operational risks and product holding costs.” 

“The capital raised in the [issuance of the bonds] will be used solely in the purchase of bitcoin and the monies will be fully exposed to the exchange rate of the bitcoin,” the press release said. 

TASE and Silver Castle did not respond to requests for comment by press time.

Related: Hive Blockchain Boosts Capacity With 1,800 Antminer Order

According to Calcalist, the letter from the Capital Markets Authority focused specifically on bitcoin-related investments by the institutions in question, such as pension company Altshuler Shaham’s $100 million investment into the Grayscale Bitcoin Trust earlier this year. It doesn’t apply to crypto trading at large.

“To be clear, we’re not talking about investments in cryptographic currencies in general, nor in the related technologies, which have an alternative economic rationale and might even enhance the market,” the letter said. 

The authority will also require institutions to submit the minutes of the discussions and meetings in which they discussed these investments, along with all materials that supported the investment decisions, Calcalist reported.

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Binance Ordered by London High Court to Trace $2.6M Hackers

5 years 2 months ago

Cryptocurrency exchange Binance has been ordered by the London High Court to trace the perpetrators of a $2.6 million hack.

  • Fetch.ai, an artificial intelligence company, had its request for Binance to identify and freeze the accounts of hackers granted, Reuters reported Friday.
  • Fetch.ai says that in June hackers stole the assets from its Binance account before selling them at a fraction of their value less than an hour later.
  • The case represents a legal challenge to Binance’s business structure and operations, which have recently met with intense regulatory scrutiny in jurisdictions around the world.
  • “We need to dispel the myth that cryptoassets are anonymous,” said Syedur Rahman, a partner at Fetch.ai’s legal representatives Rahman Ravelli, according to Reuters. “The reality is that with the right rules and applications they can be tracked, traced and recovered.”
  • Binance confirmed that it is helping Fetch.ai with the recovery of these funds.
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Polygon Merges With Hermez Network in $250M Deal

5 years 2 months ago

Polygon, a “layer 2” platform on the Ethereum blockchain, is merging with rollup platform Hermez Network in a 250 million MATIC deal. The acquisition was worth about $250 million based on MATIC’s price on Aug. 4, when the deal was struck.

Hermez will be absorbed into the Polygon ecosystem under the name Polygon Hermez, where it will become a part of Polygon’s line of products, including Polygon SDK and Polygon Avail. The entire Hermez project – its employees, technology and native HEZ token (which holders will be able to exchange at a rate of 3.5 MATIC: 1 HEZ) – will be integrated into Polygon’s platform.

Polygon’s merger with Hermez is the first complete merger of one blockchain network into another.

Related: Polygon’s New Gaming Studio Launches With Cricket NFT Platform

Earlier this year, two Ethereum projects, Keep and NuCypher, announced a merger of their protocols into a decentralized autonomous organization (DAO) in a project nicknamed “Keanu,” but will keep their brands and companies separate. And Yearn Finance frequently announces mergers and partnerships, but it is unclear what is happening under the surface of those deals. 

Polygon’s absorption of Hermez’s team and protocol is something different entirely. 

Hermez is a zero-knowledge (ZK) rollup, which means that it uses mathematical proofs to verify and settle transactions. As Ethereum struggles with transaction bottlenecks, rollups have emerged as the preferred scaling strategy. And Hermez, which is the only decentralized rollup, is a user favorite.

The Polygon-Hermez merger is part of Polygon’s new strategic focus on ZK technology, also announced Friday. Polygon has made a $1 billion commitment to developing ZK-based systems, forming partnerships, hiring employees and acquiring ZK teams and projects like Hermez. 

Related: Binance Smart Chain Beats Ethereum by Some Metrics Thanks to Latest ‘GameFi’ Craze

“We consider ZK cryptography the single most important strategic resource for blockchain scaling and infrastructure development, and we have a clear goal of becoming the leading force and contributor in this field for years to come,” Polygon co-founder Mihailo Bjelic told CoinDesk.

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