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ETH: Technology Play or Store of Value? A CoinDesk Research Report

5 years 7 months ago

Bitcoin’s (BTC) role in portfolios as a store of value is by now relatively well known. Its hard supply limit in the face of unprecedented money supply increase is encouraging traditional fund managers to allocate funds to a bitcoin portfolio position, and corporations to hold it as a reserve asset.

But what about ether? Could the native cryptocurrency of the Ethereum blockchain hold a similar position?

We know that institutional investor interest in ETH is increasing. The Grayscale ETHE trust had growth of over 40% of its almost $800 million 2020 inflows come in the fourth quarter alone. (Grayscale is a CoinDesk sister company.) A number of ETH investment products have come to market over the past few months, including several exchange-traded funds in Canada. And on Feb. 8, the Chicago Mercantile Exchange, which caters primarily to institutional investors, listened to increasing client demand and launched ETH futures.

Related: IRS Says Buying Crypto With Fiat Does Not Trigger Tax Reporting Rules

See also: Crypto Long & Short: How Coinbase Going Public Is Reshaping Trust in Markets

This growing interest can be seen in ETH’s recent performance. Whether looked at for the year to date or over 12 months, ETH has significantly outperformed BTC.

Is that why are investors are becoming increasingly interested in ETH? Or are they seeing it as a cheaper store of value than bitcoin?

A new report from CoinDesk Research looks into the value propositions of bitcoin and ether, as well as the different market structures and on-chain data.

Related: The Decoder: ‘Have Fun Staying Poor’

Our report found that while bitcoin is increasingly seen as an emergent store of value, ether is more of a technology play. For this reason, it is a riskier bet, which explains its outperformance.

However, the full story is not quite that simple. Bitcoin is also a technology play, and ether is also a potential store of value asset.

Both assets have considerable potential upside for this reason. Ether and bitcoin could end up being considered one, the other or both. Success does not depend on just one outcome.

See also: Crypto Long & Short: What Does Dogecoin Have to Do With Government Bans?

Meanwhile, the prevailing narratives of each – emergent store of value for bitcoin, technology play for ether – continue to evolve. Ethereum’s technological development is at an inflection point, with the progress towards migration to a proof-of-stake blockchain. Bitcoin’s disinflationary monetary policy is becoming more obvious as fiat monetary stimulus shows no signs of abating and a growing amount of bitcoin gets moved to long-term storage.

Download our free report to dive into the different value drivers for BTC and ETH, why institutions are interested and what risks lie ahead.

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Kings of Leon to Release New Album as NFT With Tokenized Tickets for Superfans

5 years 7 months ago

Kings of Leon will release their new album as a non-fungible token (NFT), becoming the first rock band to do so.

  • In addition to conventional release on services like Spotify, Apple Music and Amazon, the album will be released in NFT form on YellowHeart, a blockchain-based music platform founded in 2018 Rolling Stone reported Wednesday.
  • The new album, “When You See Yourself,” will be delivered as three different types of tokens: the first a special album package, the second offering live show perks and the third containing exclusive audiovisual art.
  • Albums put out as NFTs have generally been the realm of DJs like 3LAU and have seen prior releases, but the Kings of Leon is the first band to launch a new album in the blockchain-based format.
  • YellowHeart is also minting 18 “golden tickets” that unlock actual front-row concert tickets at every Kings of Leon tour for life as part of the NFT release.
  • The band will auction six of these, with the remaining 12 to be vaulted, much like rare pieces of art.
  • “Each one of those is a unique NFT with the most incredible Kings of Leon art you’ve ever seen,” YellowHeart CEO Josh Katz said in an interview.
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Crypto Wallet Exodus Seeks SEC Permission to Tokenize Shares, Aims for $75M Raise

5 years 7 months ago

Cryptocurrency wallet Exodus has applied for permission from the U.S. Securities and Exchange Commission (SEC) to carry out a public offering of tokenized shares in the company.

Exodus announced Wednesday it filed its offering circular with the regulator, and upon approval will carry out a Regulation A Tier 2 offering (often called a Reg A+). By way of this novel equity token tied to shares in the company, Exodus hopes to raise some $75 million, tapping the million or so active users of its wallet.

The filing was made last Friday and the SEC will take at least 21 days to give it the stamp of approval, Exodus said. If approved, the wallet firm joins only a select few in the crypto ranks to go the regulated route, chief among them Blockstack and its $28 million raise in September 2019.

Related: IRS Says Buying Crypto With Fiat Does Not Trigger Tax Reporting Rules

“We’ve been working on this submission for a long time, with the whole process of back and forth, back and forth,” Exodus CEO and co-founder JP Richardson said in an interview. “Obviously, it still needs to be approved and I can’t speak to any certainties here. I can tell you how excited I am.” 

Initial coin offerings (ICOs) were all the rage back in 2017, with many blockchain firms selling tokens over the garden fence to an eager audience of accredited (and, in some cases, credulous) investors. 

Exodus says it wants to allow the average Joe to become an investor in the firm and owner of its equity via a regulated token offering. Most ICO raises that chose a regulated route did so via a Reg D exemption from the SEC, which means offering to only accredited investors, generally with over $100,000 in spare capital. Only a handful of blockchain companies chose the retail-friendly Reg A+ approach.  

Exodus prep

Exodus began working in earnest on preparing a submission for the SEC back in May 2020, Richardson said. He estimated the cost of the process had come in at around $1 million. To get to the filing stage, Exodus enlisted the help of Wilson Sonsini Goodrich & Rosati (WSGR), the same law firm Blockstack used to handle its Reg A+. 

Related: The Decoder: ‘Have Fun Staying Poor’

The Exodus offering will allow the firm to sell equity tokens for $27.42 a peice (the minimum investment is $27.42). The sale will all happen inside the app and be confined to bitcoin, ether and USDC. It’s worth noting that the $50 million limit for a Reg A+ changes to $75 million on March 15.

Exodus investors must first complete a know-your-customer (KYC) check with Securitize, a firm that specializes in security tokens. The offering will be done on a first come, first served basis.

Exodus has raised only small amounts of money in the past, said Richardson: two small rounds, comprising $368,000 in September 2016, followed by $170,000 in February 2017. So how confident is he about the chance of raising the full amount?

“I feel really good about raising $75 million,” he said.

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Hex Trust Launches Licenced Custody Service for Non-Fungible Tokens

5 years 7 months ago

Digital asset custodian Hex Trust has launched a secure way of storing valuable non-fungible tokens (NFTs).

  • In an announcement Wednesday, Hex Trust, which is licensed as a trust company in Hong Kong, said its NFT Safe service provides custody support to NFT collectors and investors within its Hex Safe platform.
  • NFTs, digital tokens widely used for collectibles such as art, are soaring in popularity, with prices recently reaching into the millions of dollars for rare or desirable items.
  • Thus, Hex, which says NFT Safe is a “world first” service, believes it has become important to provide collectors and institutions with safe custody of valuable NFT assets.
  • The Hex Safe platform supports NFTs from multiple blockchain platforms, including Ethereum and its ERC-721 and ERC-1155 token standards.
  • “Given the demand and market growth [of NFTs], Hex Trust is fully committed to focus on this sector and stay at the forefront of industry developments,” said Alessio Quaglini, CEO of Hex Trust.

Read more: Top Auction House Christie’s to Accept Ether Cryptocurrency for Digital Art Sale

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Bitcoin-Based DeFi Protocol Sovryn Raises $10M, Offers $1.2M Bug Bounty

5 years 7 months ago

Sovryn, a bitcoin-based DeFi protocol, is offering a $1.2 million bug bounty after raising $10 million in a token presale.

  • The London-based project raised the funds in bitcoin through the presale of its governance token SOV at a price of 9,736 satoshis (the smallest BTC unit, equivalent to a 100 millionth of a bitcoin) per token.
  • The total digital assets Sovryn has raised now stands at $16 million, according to an announcement shared with CoinDesk.
  • The funds will partly be invested in the protocol’s bug bounty program, now offering white hat hackers up to $1.25 million if they can spot critical flaws in the Sovryn smart contract.
  • Sovryn claims bounty, offered in partnership with bug bounty platform Immunefi, is the largest ever.
  • Immunefi co-founder Travin Keith believes the program will “incentivize white hats to look through the code as well as incentivizing black hats to disclose bugs, instead of exploiting them.”
  • The platform’s page for the bounty states: “The final reward amount is capped at 10% of the funds at risk based on the vulnerability reported.”
  • The bounty would be paid out in bitcoin or the SOV token.

See also: DeFi Project ArmorFi Awards $1.5M Bounty for Bug Alert That Potentially Saved Its Reserves

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Valid Points: What Coinbase’s Public Listing Means for Eth 2.0

5 years 7 months ago

There’s a lot riding on the success of Ethereum 2.0, including the crypto-industry’s largest U.S.-based exchange going public.

Last week, Coinbase released its S-1 filed with the U.S. Securities and Exchange Commission (SEC). In it, the exchange listed potential adverse factors against its business, such as the doxxing of pseudonymous Bitcoin creator Satoshi Nakamoto, negative perceptions of cryptocurrencies and the growth of cryto-native finance platforms generally referred to as decentralized finance (DeFi).

A failure or slowdown in “the development and launch timeline of Ethereum 2.0, including the potential migration of Ethereum to a proof-of-stake model” was also listed as a possible negative factor for the exchange going forward. 

Related: IRS Says Buying Crypto With Fiat Does Not Trigger Tax Reporting Rules

Data may make the point even better: Ether made up 15% of volume on Coinbase in 2020, compared to bitcoin’s 44%. Additionally, 13% of all assets stored on Coinbase are ether. By trading and storing ether, you necessarily take on exposure to the Eth 2.0 project in its entirety.

New stakeholders in governance of Eth 2.0

Governance structures for the two largest cryptos by market cap is also a concern to weigh, Coinbase said.

“Informal governance led by Bitcoin and Ethereum’s core [blockchain] developers that lead to revisions to the underlying source code or inactions that prevent network scaling, and which evolve over time largely based on self-determined participation … may result in new changes or updates that affect their speed, security, usability or value,” the S-1 states.

It’s well known that Ethereum has a more flexible governance structure than Bitcoin. Being more flexible has some benefits, too, including the ability to respond to threats to the network such as high gas fees. 

Related: The Decoder: ‘Have Fun Staying Poor’

With Coinbase’s direct listing, it’s necessary to ask where that social pressure will push the Eth 2.0 project. Eth 2.0’s roadmap has adjusted to investor and developer demands in the past, including the early launch of the Beacon Chain in December. Will Coinbase stock holders be more interested in governance of the underlying asset in which Coinbase has a large stake? How will that change the network’s progression?

The Ethereum community has a lot on the line, too. As of Saturday, there are now over 100,000 validators staking 32 ETH on the network. That’s more than $5 billion worth of assets at time of writing locked up for a project that is still very much in the Research and Development phase. 

Yet, given a $100 billion valuation, a time may soon come when activist investors, developers and users butt heads on Eth 2.0 on a larger scale. We’ve seen it before among token projects themselves: Hedge fund manager Arca demanded developer house Gnosis change its business model or pay back users. With the public listing, the teams working on Eth 2.0 could face similar scrutiny. In other words, a Coinbase public listing brings a new group of entrants into Ethereum’s governance ecosystem.

Pulse check: Improving validator performance

If you’re new to Valid Points and the topic of Ethereum 2.0 in general, be sure to check out our 101 explainer on Eth 2.0 metrics to get up to speed about jargon and terminology used throughout this article. 

It’s been two weeks since the CoinDesk validator node, dubbed “Zelda,” was activated on Ethereum 2.0. Since Wednesday, Feb. 17, Zelda has earned 0.10 ETH, worth roughly $150.58 at time of writing. Of the 102,000 active validators on Eth 2.0, Zelda ranks #73,164 by income earned, according to block explorer beaconcha.in. 

It’s a little disheartening to see Zelda underperform against the large majority of Eth 2.0 validators. After speaking with others who also run their own Eth 2.0 node operations, I’ve learned there are tweaks and adjustments we can try to help improve node performance. 

One of them is increasing the number of other peers to which Zelda is connected. Right now, Zelda communicates with about 50 other Eth 2.0 validators. Bumping that number up to 100 or even 150 peers will increase the chances of her receiving and propagating data about the Eth 2.0 network in a timely manner. 

Speaking of data, there’s a wealth of information Zelda receives every minute about the consensus of the Ethereum 2.0 network. The one featured below, called the “Finalized Root,” tracks the value of the hash shown as an arbitrary number computed for each block created on the Eth 2.0 network. 

This metric should always look crazy and random. It represents the cryptography that is securing Ethereum’s proof-of-stake blockchain. Should these values ever appear to have a discernable pattern or trend, there is reason to believe that someone has cracked the mathematical algorithm, also called a “cryptographic hash function,” securing the network. 

The finalized root is one of several new metrics CoinDesk is able to track in real time through running our own Ethereum 2.0 validator. Over the next few weeks, I’ll highlight more abstruse metrics from the CoinDesk Data Dashboard that illustrate the health and activity of the Eth 2.0 network.  

After all, the main purpose of the Valid Points project and spinning up the Eth 2.0 node in the first place was never really about maximizing our returns on investment. (Although the more we can earn for charity, the better!) The motivation for Zelda has always been to chronicle the development of Eth 2.0’s evolution by running our own hardware and gaining an unvarnished perspective of the network’s live development. 

For the full back story of the Valid Points project, be sure to read our CoinDesk article on how this journey got started. 

Validated takes
  • DeFi token SUSHI hits record price high and eyes further gains (Article, CoinDesk)
  • Funding culture and empowering artists with NFTs (Podcast, CoinDesk)
  • How Hashmasks are setting the standard for digital art (Article, CoinDesk)
  • New Ethereum-based derivatives trading platform wins EU’s MIFID license (Article, CoinDesk)
  • NFTs Aren’t Art? OK, Boomer (Article, CoinDesk)Second Ethereum ETF Filed in Canada (Article, CoinDesk)
  • Establishing bounds for miner revenue in EIP 1559 (Blog post, Deribit Insights)
  • F2Pool, Ethereum’s fourth-largest mining pool by hashpower announces support for EIP 1559 upgrade (Blog post, F2Pool)
  • A primer on the Polkadot network (Blog post, Messari)
Eth 2.0 factoid of the week Open comms

Feel free to reply any time and email research@coindesk.com with your thoughts, comments or queries about today’s newsletter. Between reads, chat with us on Twitter.

Valid Points incorporates information and data directly from CoinDesk’s own Eth 2.0 validator node in weekly analysis. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post. 

You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is: 

0xad7fef3b2350d220de3ae360c70d7f488926b6117e5f785a8995487c46d323ddad0f574fdcc50eeefec34ed9d2039ecb. 

Search for it on any Eth 2.0 block explorer site!

Will Foxley and I will be continuing the conversation on Ethereum 2.0 with Consensys’ Ben Edgington in a CoinDesk podcast series called “Mapping Out Eth 2.0.”  New episodes air every Thursday. Listen and subscribe through the CoinDesk podcast feed on Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, IHeartRadio or RSS.

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Wall Street Veteran Jim Bianco Says DeFi is ‘Recreating’ the Financial System

5 years 7 months ago

Decentralized finance (DeFi) is “recreating the entire financial system,” according to Jim Bianco, president of Bianco Research and Bloomberg columnist.

During a video interview with Fox News on Tuesday, Bianco said, “DeFi could disrupt the current financial system the way ride-sharing companies disrupted taxi companies or the internet disrupted newspapers, or e-commerce disrupted retailing.”

DeFi refers to the shift from traditional, centralized financial systems to decentralized platforms enabled by blockchain technologies. The DeFi space has witnessed explosive growth over the past 12 months, with advocates saying it will democratize finance by cutting out middlemen such as exchanges, lenders and insurance companies.

Related: IRS Says Buying Crypto With Fiat Does Not Trigger Tax Reporting Rules

However, according to Bianco, DeFi is still evolving. “It’s nascent and buggy. It’s got problems, but they will solve those,” the Wall Street veteran said.

Bianco recently said he’s bullish on bitcoin and cryptocurrencies in general. “Cryptocurrencies are starting to take on the properties of financial assets in that they seem to be impacted by financial market events,” Bianco said last week in a discussion about bitcoin’s price drop in the wake of rising bond yields.

At press time bitcoin was trading near $51,660, representing a 5.9% gain over 24 hours.

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Kentucky Lawmakers Approve House Bill Providing Tax Break for Crypto Miners

5 years 7 months ago

In a 19-to-2 vote, House lawmakers in Kentucky have approved a bill that could draw cryptocurrency mining operations to the state.

According to a report from the Lexington Herald on Tuesday, the House budget committee approved House Bill 230, which removes sales tax obligations from electricity purchased for use by cryptocurrency mining businesses.

The bill now moves to the upper house for review, joining the Senate’s own tax break for cryptocurrency mining operations: Senate Bill 255. Kentucky uses omnibus branch-wide budget bills, known as general appropriation bills, for its legislative process.

Related: Valid Points: What Coinbase’s Public Listing Means for Eth 2.0

The bill’s fiscal note estimates a cost to the state’s General Fund, which collects receipts from the likes of income and property tax, would be from $1 million a year. Still, committee members recognized the move comes as part of Kentucky lawmaker’s larger plans to incentivize job creation and spur on industry growth.

The bill’s shortcomings, however, were raised by some, who noted that mining facilities consume large amounts of electricity and it is not necessarily a good thing for the state, according to the report.

See also: Kentucky Bill Seeks to Lure Crypto Miners With Tax Breaks

“Mining for cryptocurrency takes a lot of electricity,” agreed Rep. Steven Rudy (R), the bill’s sponsor. “It is not just a few people sitting in their mom’s basement or in their parents’ basement writing code. This is actually highly sophisticated, highly technical.” But the Representative shrugged off concerns from other members such as those posed by Rep. Josie Raymond (D).

Related: Wall Street Veteran Jim Bianco Says DeFi is ‘Recreating’ the Financial System

“Why do we particularly want this industry in Kentucky?” asked Raymond, according to the report.

“We would love to have more industry,” Rudy responded. “We welcome industry here.”

See also: Listed Crypto Miner Argo Blockchain Now Pays CEO in Bitcoin

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Listed Crypto Miner Argo Blockchain Now Pays CEO in Bitcoin

5 years 7 months ago

U.K.-listed cryptocurrency mining firm Argo Blockchain (LON:ARB) started paying the salary of its CEO, Peter Wall, in bitcoin this month.

  • In a news release at the London Stock Exchange Wednesday, the firm said other staff are now also being offered the bitcoin salary option. 
  • Monthly payments will automatically be converted from fiat currency to bitcoin at the daily market rate via the Bitcoin Savings service offered by the Toronto-based Satstreet exchange, said Argo.
  • “I’m … pleased to be the first publicly-traded company that we know of to have their CEO paid in bitcoin,” said Wall.
  • The company also announced that 4,500 Bitmain Antminer S19 and S19 pro miners leased from Celsius Network in February are all now operational.
  • That takes Argo’s total mining capacity to 1,075 petahashes for bitcoin and other SHA-256 cryptocurrencies, and 280 megasols of capacity for cryptos based on the equihash algorithm.
  • The company mined 129 BTC or bitcoin equivalent in February, bringing in revenue £4.34 million ($6 million).

Read more: Bitcoin Miner Argo Blockchain Starts Trading on the US OTCQX Best Market

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Iran Should Mine Crypto to Skirt Sanctions, Says President-Linked Think Tank

5 years 7 months ago

An Iranian think tank associated with the office of President Hassan Rouhani has called for the nation to mine cryptocurrency in order to help the economy amid tough international sanctions.

The Iranian Presidential Center for Strategic Studies report says “cryptocurrency extraction” could provide economic benefits to several different sectors of the troubled economy, according to Iran Wire.

The industry could generate $2 million a day and $700 million a year in revenue from mining, while revenues from transaction fees could generate $22 million, the think tank says. 

Related: Listed Crypto Miner Argo Blockchain Now Pays CEO in Bitcoin

“If large mining farms are established, the need to employ manpower for monitoring and repair, security, electrical engineers, and technical staff related to hardware and software equipment will increase, which leads to more job opportunities in other sectors,” the authors write.

Another key point made by the think tank is that bitcoin, in particular, could help circumvent sanctions on Iran.

 “As the newly-extracted bitcoins are not easily traceable, despite the pressure of sanctions on the country, domestic economic actors can use newly-extracted cryptocurrencies, which are preferable to existing bitcoins, on international exchanges,” they said. 

Recently, Iran has already been trying to make cryptocurrency mining a source of income for the state, while cracking down on independent miners whom it blames for recent power outages.

Related: Bitcoin Retakes $50K, a Key Level for a Bull Revival

Read more: Inside Iran’s Onslaught on Bitcoin Mining

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Bitcoin Retakes $50K, a Key Level for a Bull Revival

5 years 7 months ago

Bitcoin has once more crossed above $50,000, possibly marking an end to the recent price pullback and a revival of the broader uptrend.

The top cryptocurrency by market value is trading near $10,950 at press time – up 3.86% in 24 hours – having dropped from record highs above $58,000 to $43,000 in late February, according to CoinDesk 20 data.

“The correction looks to have ended with a move above $50,000,” John Ng Pangilinan, managing partner at Singapore-based Signum Capital, told CoinDesk. Securing a foothold above that level is key to the resumption of the broader uptrend and a move toward new record highs, he said.

Related: Listed Crypto Miner Argo Blockchain Now Pays CEO in Bitcoin

Bitcoin’s latest break above the psychological hurdle looks sustainable, as the futures market is in a far more healthy state than in mid-February when excess bullish leverage was seen. Further, institutional demand remains strong, as highlighted by the recent outflows from cryptocurrency exchange Coinbase Pro.

“This time it’s at $50k with default funding, no overcrowded futures market, spot market parity with futures, and high Coinbase premium, coupled with large outflows and institutional interest,” market analyst Joseph Young tweeted.

The comments were echoed by Matthew Dibb, COO and co-founder of Stack Funds, who said the overall trend remains bullish, adding that a UTC close above $52,100 would pave the way for a move toward new lifetime highs above $58,332.

However, a new record high could remain elusive if the U.S. bond yields resume their recent rally, pushing stock markets lower, he said.

Related: Iran Should Mine Crypto to Skirt Sanctions, Says President-Linked Think Tank

“From a fundamental perspective, we are still at the mercy of macro markets. Knee jerk reactions in the bond market and volatile equities may continue to prove ‘risk off’ correlations with Bitcoin,” Dibb told CoinDesk. “We remain extremely bullish but would not be surprised to see further volatility in the short term.”

Bitcoin and stocks faced selling pressure last week, as the U.S. 10-year bond yield surged to 12-month highs above 1.6% and investors priced in prospects of an early unwinding of monetary stimulus by the Federal Reserve.

Also read: Institutions Are Making Bullish Bets on Bitcoin Rallying to $75K by May – Or Even Higher

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Warren Says Yellen Left No Room for Ambiguity in ‘Speculative’ Bitcoin Comments

5 years 7 months ago

Democratic Senator Elizabeth Warren backed recent comments on bitcoin by Treasury Secretary Janet Yellen during an interview with CNBC’s Squawk Box on Tuesday.

Asked if she agreed with comments saying the cryptocurrency was a “speculative” asset made by Treasury Secretary Janet Yellen late in February, the Senator said, somewhat coyly: “I think Janet’s a really smart woman.”

When pressed, she said, “‘Speculative in nature and going to end badly’ – I don’t think Janet left a lot of room for ambiguity.”

Related: Listed Crypto Miner Argo Blockchain Now Pays CEO in Bitcoin

CNBC’s host also clarified that Yellen had actually said bitcoin could “end badly for some.”

The topic of bitcoin was brought up as a potential potential problem for a new “wealth tax” – proposed by Warren and Senator Bernie Sanders on Monday – that would see rich individuals charged 2% annually on their net worth above $50 million and 3% above $1 billion.

Yellen has been an outspoken critic of cryptocurrencies, calling them a “growing problem” and citing their use in illegal activity such as the drugs trade and terrorist funding. However, she’s also said that cryptocurrencies have the potential to “improve the efficiency of the financial system.”

See also: Bitcoin’s Rise Should Make Regulators Ask if the Fed’s Policies Have a Hand in It: WaPo

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Insurance Giant Aon Is Testing the Waters of DeFi

5 years 7 months ago

Insurance broker Aon is dipping a toe in decentralized finance (DeFi).

Announced Wednesday, the world’s second-largest insurance intermediary has embarked on a pilot with Nayms, an insurtech platform that allows cryptocurrency holders to provide decentralized insurance cover against losses due to hacks or buggy software.

Also involved in the project are Relm Insurance, a Bermudian insurer that specializes in digital assets, and Teller Finance, an automated matchmaker between investors’ assets and crypto risk liabilities.

Related: Listed Crypto Miner Argo Blockchain Now Pays CEO in Bitcoin

“The Nayms platform puts the tool of smart contracts in the hand of regulated underwriters (like Relm) and brokers (like Aon), to open up a new capital source when underwriting crypto risk,” Nayms CEO Dan Roberts said via email. “This could be in either crypto (ETH, BTC) or in fiat (via a stablecoin). Aon is assessing both options as part of longer term programs.”

The firms did not elaborate on when the pilot might morph into something more like a live product.

Stepping back, the process of bringing together investors whose collateral will be used to insure specialized risks, is not so dissimilar to the way the Lloyd’s of London insurance market operates. Lloyd’s is backed by pools of underwriters, composed of both corporations and private individuals. (These private investors became known as “Lloyd’s names,” which “Nayms” is a play on.)

Decentralized insurance offerings already exist, as with DeFi insurance alternative Nexus Mutual, which created a community-owned asset pool allowing cover for certain crypto industry risks. Nexus recently began expanding its repertoire beyond decentralized exchange and finance.

Related: Iran Should Mine Crypto to Skirt Sanctions, Says President-Linked Think Tank

Aon is familiar with the cryptocurrency space, most notably having worked with San Francisco-based exchange Coinbase. For the most part, the policies Aon and other brokers like Marsh are involved in tend to insure crypto while at rest, held in cold storage and not connected to the internet.

“Aon is committed to embracing technology and is constantly developing its offering for our growing client base in the digital asset space,” Aon’s crypto specialist, Benjamin Peach, said in a statement. “By collaborating with Nayms and Relm to launch this pilot, we are taking the first step to creating a platform for digital asset companies to scale up their cover efficiently and cost effectively as the market continues to expand.”

Roberts of Nayms said the pilot is about creating more cover for the risks associated with DeFi platforms, but also the wider crypto space as well.  

“In contrast to other insurance protocols, Nayms is a general marketplace, in the sense that any type of insurance product can be placed,” said Roberts. “This allows us to enable a wide variety of cover that’s needed in digital assets and beyond, instead of, for example, covering smart-contract risk exclusively.”

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BC Group, VSAL Join Forces to Serve Institutional Bitcoin Market in Asia

5 years 7 months ago

BC Group, the owner of institutional crypto brokerage firm OSL, has partnered with Venture Smart Asia Limited (VSAL), a digital asset fund manager. Both BC Group and VSAL hold licenses from Hong Kong’s financial regulator, the Securities and Futures Commission (SFC).

Announced Wednesday, the two parties have signed a memorandum of understanding: OSL will provide brokerage services, including trade execution and capital introduction services, for Arrano Capital, VSAL’s blockchain and crypto investing arm.

The collaboration, the first between an SFC-regulated trading firm and a SFC-regulated brokerage, is further evidence of an institutional crypto charge happening in innovation-friendly trading hubs like Hong Kong, Singapore and Switzerland.

Related: Gensler Straddles Innovation and Enforcement in Senate Hearing

VSAL launched a bitcoin tracker fund last summer, which currently has around $30 million in assets under management, according to Arrano Chief Investment Officer Avaneesh Acquilla. An actively managed fund offering exposure to the top 50 crypto tokens will launch imminently, with the first close of funds targeting around $25 million, Acquilla said.

“There’s clearly a lot of interest in the Asia region, if you look at how Asia is represented with some of the exchanges, and obviously, the mining presence in China,” Acquilla told CoinDesk in an interview, adding:

“I think it is noticeable that the institutions [in Asia] have been a little bit slower than in North America to start allocating to the space. And so I think there’s potentially quite a good growth story here.”

OSL’s Matt Long told CoinDesk one difference between institutional investors in Asia and their U.S. counterparts is that the latter has more appetite to buy and hold long-term.

Related: Billionaire Lasry, Ex-CFTC Head Giancarlo Invest in Crypto Firm BlockTower

“Consistent with Asia’s appetite for risk, we can see institutions and Asian family offices doing a little bit more trading around ranges in the underlying assets,” said Long. “As investors become more familiar and comfortable with the asset class, you will probably see portfolios turning over more often than in either the U.S. or Europe.”

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Gensler Straddles Innovation and Enforcement in Senate Hearing

5 years 7 months ago

“I’m neither a maximalist nor a minimalist but I do believe [blockchain is] a catalyst for change,” said Gary Gensler, the potential next Chairman of the Securities and Exchange Commission (SEC).

Gensler was speaking to the Senate Banking Committee, which held a hearing Tuesday to consider his nomination to the SEC, along with President Joe Biden’s nominee to run the Consumer Financial Protection Bureau, Rohit Chopra. 

Gensler’s background suggests that he is both pro-crypto and pro-regulation, and it remains unclear if the industry will perceive him as friendly or overzealous on regulation. The hearing didn’t provide too many clues, as Gensler was careful to strike a balance between emphasizing regulating suspicious behavior as well as encouraging new innovations. 

Related: BC Group, VSAL Join Forces to Serve Institutional Bitcoin Market in Asia

The largely substantive hearing saw senators ask Gensler to detail how he would approach current issues, including the recent GameStop stock market volatility and Robinhood’s payment for order flow model, diversity mandates and financial regulation in the wake of the pandemic. 

Gensler, who has lectured at MIT about the cryptocurrency industry, praised the technology at various points during the hearing, noting that it could provide cheaper cross-border or domestic transactions, while the underlying blockchain technology can be applied to medical records, trade finance or other data collection uses.

“Bitcoin and other cryptocurrencies have brought new thinking to payments and financial inclusion, but they’ve also raised new issues of investor protection that we still need to attend to,” he said. “If confirmed at the SEC, I’d work with fellow commissioners to both promote the new innovation, but also at the core to ensure investor protection.”

This would include examining what might fall under U.S. securities laws, and checking whether there are any specific investor protection statutes that would apply to crypto exchanges, he said.

Investor protections

Related: Billionaire Lasry, Ex-CFTC Head Giancarlo Invest in Crypto Firm BlockTower

Gensler, a former Commodity Futures Trading Commission (CFTC) chairman, repeatedly brought up investor protection concerns, telling Senator Bill Hagerty (R-Tenn.) that as cryptocurrencies and possible central bank digital currencies grow, “it’s important to stay true to our principles of investor protection and capital formation.”

If an entity is offering an investment contract, that falls under the SEC’s purview. If a cryptocurrency is more a commodity like Bitcoin, it could fall under the CFTC, or Congress could determine how it would be overseen, he said. 

These protection concerns include crypto custody and ensuring that regulated entities have sole control over the private keys for digital assets, he said. Gensler’s concerns also include overseeing fraud and manipulation. 

“That’s the greater challenge frankly, because there has been … for some markets, usually operating overseas but some markets have been really rife with fraud and scams so trying to protect the investors against that,” he said.

The SEC should also remain technology-neutral, Gensler said. 

When Senator Cynthia Lummis (R-Wyo.) asked how the SEC could regulate the industry, Gensler said it would be important for the agency to provide guidance, which could occur through no-action letters or rulemaking.

Real-time payments

Both Gensler and Chopra mentioned the benefits of a faster real-time payment settlement system, with Chopra specifically calling for more work to be done in implementing such a system. 

“We can not be falling behind other countries. We see that China is in many ways investing in faster payments, in a stablecoin,” Chopra said. “That will help consumers and businesses get funded faster, to their benefit, and I strongly support efforts to modernize that system so that everyone can have equal access.”

Chopra has advocated for a modernized real-time payment system before, writing a letter to the Federal Reserve in 2019 recommending the central bank move forward on the “FedNow” service in light of the at-the-time Libra stablecoin initiative. He revisited his concerns on Tuesday.

“Facebook’s Libra proposal drew a lot of scrutiny from this committee, as well as regulators all over the world with respect to how it might impact privacy, fair competition and even compliance with our money laundering laws,” Chopra said. 

Chopra also raised data privacy concerns, saying there are “real questions” about what data is collected by technology companies and how that data is used.

After Tuesday’s hearing, the Senate Banking Committee must vote on whether to advance the nominations. The full Senate will vote on whether to confirm the nominees to their respective positions only after that. 

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Billionaire Lasry, Ex-CFTC Head Giancarlo Invest in Crypto Firm BlockTower

5 years 7 months ago

Hedge-fund manager and sports-team co-owner Marc Lasry and former U.S. Commodity Futures Trading Commission Chairman Christopher Giancarlo have taken stakes in crypto-asset and blockchain investment firm BlockTower Capital, Bloomberg reported.

  • Financial terms weren’t disclosed.
  • While Lasry heads investment firm Avenue Capital, his stake is on his own behalf, Bloomberg said citing people familiar with the matter. Lasry is also co-owner of the Milwaukee Bucks, a National Basketball Association team.
  • Giancarlo, who has also been an executive at swaps brokerage GFI Group, was known as “crypto dad” during his tenure as CFTC head from 2017-2019. He is co-founder of the Digital Dollar Foundation.
  • Giancarlo confirmed the investment but declined to comment further, Bloomberg said.
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Market Wrap: Bitcoin Continues Choppy in High $40Ks Amid Market Indecision

5 years 7 months ago
  • Bitcoin (BTC) trading around $47,700 as of 21:00 UTC (4 p.m. ET) slipping 1.83% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $50,213 to $47,118.
  • Following a correction over the weekend, bitcoin struggles to regain upward momentum as market indecision lingers.

Bitcoin slid 5%, struggling to maintain momentum after a big rally on Monday to start off the month.

As of 21:00 UTC (4 p.m. ET), bitcoin was changing hands just above $47,000 on Coinbase. The largest cryptocurrency is still well off its all-time high price above $58,000 reached late last month. 

A combination of factors could have spooked some cryptocurrency traders, leading to last week’s 21% sell-off, the biggest for a seven-day stretch since March 2020. 

  • Grayscale Bitcoin Trust’s (GBTC) premium to its underlying asset flipped negative for the first time in years last week shortly before the market dipped, potentially signaling investors exiting the market.
  • Goldman Sachs announced plans to restart its cryptocurrency trading desk, which some traders speculated could be bearish for the market simply because of the timing of Goldman’s initial launch of the desk at the market’s peak in 2017.
  • Leading stablecoin issuer Tether was threatened with a 500 BTC ransom note to be paid to prevent the public release of supposed documents between Tether and its bank, Deltec.

Related: BC Group, VSAL Join Forces to Serve Institutional Bitcoin Market in Asia

But there’s also been a steady stream of bullish news:

  • Cboe BZX Exchange filed to list shares of VanEck’s bitcoin ETF, kicking off the regulatory review process for an exchange-traded fund listing in the US.
  • Goldman Sachs restarting its cryptocurrency trading desk is not bullish to many traders who see it as merely another indicator that more institutional traders and investors are showing interest in digital asset markets.
  • Corporate buyers aren’t finished investing either, with bitcoin-laden MicroStrategy topping off its latest $1 billion investment with another $15 million purchase.
  • Citigroup released a 108-page report about the cryptocurrency industry in which it said bitcoin is at a “tipping point” amid surging retail and institutional interest.
  • PayPal is said to be in talks to acquire Curv, a cryptocurrency custody business, in a move that could position the payments giant to dive further into the crypto market. 
  • Large bitcoin outflows from Coinbase continue. Another 12,000 BTC left Coinbase on Tuesday. Although there are many blind spots in Bitcoin blockchain data, these large outflows have recently coincided with investments from institutional or corporate investors. 

Speaking to Cboe’s filing, EQUOS head of sales and trading Matt Blom told CoinDesk, “This by no means ensures the floodgates will open, but it is a huge step towards allowing the investing public easy access to the performance of our favorite asset.” As regulators consider the listing, “there will be a long line of competitors to the VanEck bitcoin ETF hoping that the winds of change are officially here,” Blom said.

The bottom line: The market is quiet as it struggles to find direction. Bitcoin has gained 60% year to date. Ether (ETH) has doubled over the same period but today the crypto is down -3.87%.

Other markets

Digital assets on the CoinDesk 20 are down Tuesday. Notable winners as of 21:00 UTC (4:00 p.m. ET):

Related: Gensler Straddles Innovation and Enforcement in Senate Hearing

One notable loser:

Equities: 

  • Asia’s Nikkei 225 closed the day up nearly 700 points at 29,663.
  • The FTSE 100 in Europe gained less than half a percent, reaching 6,632.
  • The S&P 500 in the United States dipped 0.8% to 3,870.

Commodities:

  • Oil dropped 1%. Price per barrel of West Texas Intermediate crude: $59.61.
  • Gold was in the green by 0.56% at $1,734 as of press time.

Treasury bond:

  • The 10-year U.S. Treasury bond yield climbed Tuesday to 14.15, in the red 2.14%.
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More Institutional Investors Jumping Into Bitcoin Leaves Less to Go Around, Data Shows

5 years 7 months ago

Four million. That’s roughly how much bitcoin is circulating freely right now, blockchain data show. The number has been getting a little smaller with each passing month over the last year. 

It’s the assessment of Glassnode, an analysis firm that tracks blockchain data. The pattern suggests that the ever-decreasing supply of bitcoin available to buy and sell might lead to a price surge as more institutional investors embrace the largest cryptocurrency as an investment.

Bitcoin’s “liquid supply change” – the amount by which the number of coins in circulation has changed over the prior 30 days – has been negative for most of the past year, according to Glassnode:

Related: BC Group, VSAL Join Forces to Serve Institutional Bitcoin Market in Asia

That’s a longer period in negative than seen historically, potentially providing more support to bitcoin’s price strength in the long term despite short-term corrections like last week’s 21% retreat.

As of Monday, there were only about 4 million BTC in constant circulation and available for buying, trading and selling, according to Glassnode. The 30-day net change of BTC supply held by liquid and highly liquid entities has been in the negative territory since last April, except for a short stint between July and August and again briefly in December. 

“This has never happened before for such an extended period of time, and could lead to a massive supply squeeze soon,” Glassnode wrote on Feb. 26 in its weekly newsletter.

Increased recognition of bitcoin’s long-term value

The Bitcoin blockchain’s third halving last May cut the pace of mining rewards to 6.25 BTC for every data block (roughly every 10 minutes) from 12.5 BTC. At the same time, big Wall Street firms like Goldman Sachs, Citigroup and BlackRock are now dabbling in cryptocurrencies, while the payment giants PayPal and Square’s Cash App have allowed their users to buy and sell the digital assets.

Related: Gensler Straddles Innovation and Enforcement in Senate Hearing

On Monday, Daniel Loeb, CEO and founder of the hedge fund Third Point, wrote in a series of tweets that he was taking a “deep dive into crypto.” 

Alessandro Andreotti, an over-the-counter bitcoin broker, told CoinDesk that “institutions are buying up more bitcoin per month than the ones that are being mined, and there just isn’t enough for everybody.”

“This is the biggest factor that has been driving bitcoin’s price up lately,” he added.

The supply dynamic could prove crucial to restoring a bullish tone to the bitcoin market, after last week’s price correction shook some retail investors’ confidence. The sell-off took bitcoin to near $43,000, down 26% from an all-time high price above $58,000 on Feb 21.

Compared with bitcoin’s last big market correction in early January, fewer long-term bitcoin holders appeared to be reducing their positions or taking profits last week, according to Glassnode. This can be seen in the chart below, where the shaded red area – indicating a position reduction by long-term holders – has been moving back toward a neutral footing.

Supply squeeze for institutions

Data from another blockchain-analysis firm, CryptoQuant, show that more than 12,000 BTC, worth roughly $600 million, was moved out of the cryptocurrency exchange Coinbase Pro Tuesday – seen as a likely withdrawal to cold storage for long-term holding by one or more institutional investors. It might be a sign the investors took advantage of the price dip to accumulate bitcoin at a discounted price. 

Exchanges like Coinbase Pro are among the few preferred platforms by institutions to buy and sell bitcoin, according to John Willock, chief executive at digital-asset exchange Blocktane. It means that bitcoin’s already finite supply is only more scarce to these large bitcoin buyers.

“Coinbase will only touch coins through their exchange, liquidity providers and network of other partners that are brought to their liquidity pool by parties which are able to be fully vetted for the source of legitimate funds,” Willock said. “The bitcoin available on that platform can be considered ‘clean’ and not having recently been the proceeds of a hack, theft, ransomware or darknet markets.”

Fewer bitcoins are becoming available to institutions “because they have higher standards than the general market, “ Willock said. “So, as a result, these sorts of institutions can be forced to start bidding up coins on these ‘clean’ exchanges, and that drives up the price overall.”

Read More: Bitcoin Outflows From Coinbase Suggest Institutions Are Buying the Dip

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Discover Financial Planning a ‘Roadmap’ for Crypto, Blockchain Products

5 years 7 months ago

Discover Financial is planning to break into the crypto space with a suite of yet-to-be-developed digital currency products, according to a new job posting.

The third-largest credit card brand in the U.S. on Tuesday began searching for a Blockchain & Digital Currency Product Manager to sketch out its crypto roadmap. This new strategist position will be tasked with identifying opportunities in crypto, educating C-suite suits on the tech and managing rollout, the listing said.

It is unclear how Discover might try to leverage its 57 million cards for crypto. Indeed, the Tuesday posting for an early-stage blockchain strategist makes clear that any corporate plans are still in the works. The position’s exceptionally broad mission only serves to underline that Discover could take its roadmap in any number of ways.

Related: BC Group, VSAL Join Forces to Serve Institutional Bitcoin Market in Asia

Discover did not immediately return multiple requests for comment.

At the very least, the position signals Discover does not want to be left behind in the traditional financial services industry’s race toward cryptocurrencies. Its financial services competitors have already jumped well ahead, with Visa and Mastercard both planning to integrate cryptos directly on their far-larger card networks.

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TaxBit Raises $100M in Bid to Take Crypto Taxation Software Global

5 years 7 months ago

Cryptocurrency tax automation firm TaxBit raised $100 million in a Series A funding round led by crypto investment fund Paradigm and Tiger Global.

The three-year old startup, which builds tax assistance tools for U.S. crypto exchanges and customers, told CoinDesk it will more than double its 40-odd headcount as it prepares to add even government clients to the list.

TaxBit’s software powers behind-the-scenes number crunching for exchanges in order to give crypto traders a handle on their tax burdens. Going into the 2021 tax season, TaxBit founder Austin Woodward told CoinDesk his firm has already generated over 1 million reports for exchanges like Gemini.

Related: BC Group, VSAL Join Forces to Serve Institutional Bitcoin Market in Asia

Gemini founders Tyler and Cameron Winklevoss invested in TaxBit’s Series A, as did PayPal Ventures and CoinBase Ventures. The VC trio led a separate “strategic investment” in TaxBit earlier this year.

The eye-popping raise will allow the historically hush-hush, Utah-based firm to explode into the global crypto tax field, Woodward said. First up is a U.K. debut in the next few months followed by a smattering of other international markets.

Along the way, TaxBit will continue integrating its B2B software across more U.S. exchanges, though Woodward wouldn’t say which ones. 

Woodward even hinted a government partnership is fast approaching, cryptically citing the City of Miami’s bold bitcoin strategy. 

Related: Gensler Straddles Innovation and Enforcement in Senate Hearing

“The reason for the big funding is because that’s what it takes to go and build an asset, a platform, that can enable an entire asset class. Like, that’s how broad our mission is,” Woodward said.

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