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Jim Cramer Tells GameStop to Buy Bitcoin Amid Latest Stock Surge

5 years 7 months ago

CNBC-TV host Jim Cramer thinks videogame retailer GameStop (GME) – the firm at the heart of the recent WallStreetBets-led retail trading frenzy – should buy bitcoin.

With GameStop shares up by 100% and closing at $91.71 in the final hours of trading on Wednesday, Cramer tweeted: “GME–issue one billion dollars in stock, Buy one billion in bitcoin and watch your stock go to $430…”

MicroStrategy, Square, Tesla and others have recently been buying bitcoin as a hedge against inflation and a devaluing dollar. Cramer previously endorsed MicroStrategy’s bitcoin treasury reserve and said he wouldn’t bet against CEO Michael Saylor, whom he called a “gunner.”

Related: DeFi Exchange 1Inch Expands to Binance Smart Chain Citing ETH Gas Fees

Earlier this month, GameStop’s stock price rose sharply as groups of retail traders led by Reddit group r/WallStreetBets bought its stock and others that were being shorted by hedge funds. When the Reddit group started buying, the stocks went up and some short sellers lost billions of dollars. On Tuesday, it emerged that GameStop CFO Jim Bell – referenced in Cramer’s tweet – had resigned for reasons not disclosed by the company.

In another tweet over the latest GME price rise, Cramer added, “This is so wild west […] The SEC must be having a fit!!!”

Read more: Jim Cramer Thinks ‘Every’ Corporate Treasurer Should Be Thinking Bitcoin

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Coinbase Has Held Crypto Assets Like Bitcoin on Its Balance Sheet Since 2012

5 years 7 months ago

Cryptocurrency exchange Coinbase revealed that it has held bitcoin and other crypto assets on its balance sheet since its founding in 2012.

  • According to a blog post Thursday, the company plans to maintain its crypto exposure and aims to use that experience to assist other companies that wish to do the same.
  • The blog adds that Coinbase has executed “nine- and ten-figure trades” for some of the world’s largest institutions.
  • The news comes after major listed firms including Tesla and MicroStrategy have disclosed bitcoin treasury investments over recent months.
  • The disclosure also comes as Coinbase, which facilitated Tesla’s purchases, is preparing for a public listing in the U.S.

See also: How Coinbase Is Worth $100B

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Mystery Over Why Blockchain Australia Revoked Membership of Crypto Project Qoin

5 years 7 months ago

The leading blockchain industry body in Australia has ejected retail-focused cryptocurrency project Qoin from its membership list, but it’s not clear why.

According to a Feb. 19 notice from Blockchain Australia (BCA), it issued a summons to Qoin on Jan. 29, asking Qoin to respond.

BCA said that, after reviewing Qoin’s response and the “circumstances of the matter,” it terminated the project’s membership, meaning that Qoin must cease using of the Blockchain Australia logo and name in connection with its business or promotional activities.

Related: DeFi Exchange 1Inch Expands to Binance Smart Chain Citing ETH Gas Fees

BCA aims to “advance the adoption of blockchain technology throughout Australia,” according to its website. It also provides members operating in the local industry an air of legitimacy.

When asked for specific reasons behind BCA’s decision to remove its membership, Qoin chief marketing officer Andrew Barker told CoinDesk the firm had not received “any extra documentation pinpointing any example.”

A “formal” public response to the notice posted Wednesday by Qoin, though, alleges the notice from BCA included “false allegations” around “communication and disclosures” on the project’s website.

“The timing … aligns with the emergence of false and misleading comments … made by certain antagonists on social media platforms including a previous board member,” Qoin said in the post.

Related: Anchorage, Newly Cleared as US Crypto Bank, Raises $80M From A16z and Others

Some reports have suggested that the former BCA board member is Nuggets News CEO Alex Saunders, who alleged in a tweet that Qoin is the “biggest crypto scam” in Australia two days before BCA’s notice was served.

Barker said that, while “some have drawn that conclusion,” because of the timing of the notice and because of Saunders’ prior role, Qoin did not know that “as a fact.”

“We considered this notice a premeditated attack against Qoin,” the project alleged in its post. It also claimed that during the period of its response and the final notice “no questions were raised” nor “updates given” by BCA.

Barker further alleged BCA had chosen to edit out three lines of the document that was forwarded to Qoin in the notice that was made public. He would not disclose the lines, saying the BCA should provide them.

See also: Australia’s Blockchain Ecosystem Needs More Support From Regulators, Says Industry Body

Qoin said it will “vigorously” defend any statements and actions made by outside parties that it considers “factually incorrect, slanderous and defamatory” to its brand. Barker said Qoin is currently talking to a “number of advisories.”

CoinDesk attempted to contact both the BCA and Saunders for further comment, but did not receive a reply by press time.

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Germany’s Solarisbank Launches Licensed Crypto Brokerage

5 years 7 months ago

German fintech firm Solarisbank is building on its regulated crypto custody service with a brokerage and trading API.

Solarisbank, which provides Sumsung among other companies with a range of APIs for digital banking and payments, announced Thursday it will offer fiat-to-crypto trading and instant settlement from within its custody solution. 

“We started with custody and now the next step is the brokerage API,” Julian Grigo, managing director at Solarisbank Digital Assets, said in an interview. “Our B2B customers will be able to get a bank account, store crypto and with the brokerage API, they can swap or exchange their fiat money to bitcoin or other cryptocurrencies.” 

Related: Nvidia Estimates Ethereum Miners Contributed 2%-6% of Q4 Revenue

Custody is the first step into crypto for large regulated firms, which has been happening recently with the likes of BNY Mellon and Standard Chartered making announcements. Germany is one of the few places to offer a special crypto custody license via the financial regulator BaFIN. This has driven a hotbed of innovation with firms like Solarisbank and custody provider Finoa leading the pack.

There’s a strong pipeline for crypto services, said Grigo, pointing to non-crypto businesses tapping into the world of digital assets. 

“We are building the rails for the institutional or the retail investor,” he said. “We see this in the U.S. with Square, or in the U.K. with Revolut. What’s happening globally is also happening in the German market, and we definitely see this demand.”

Thanks to a close partnership with Luxembourg-based exchange Bitstamp, Solarisbank is touting “in-custody” brokerage and instant settlement. U.K.-based BCB Group (which also works with Bitstamp) offers a similar instant settlement network with banking from ClearBank.

Related: Arcane Research: Banking on Bitcoin – The State of Bitcoin As Collateral

This type of blockchain-enabled instantaneous swapping of crypto and fiat completely avoids the sorts of vagaries seen in the recent case of Robinhood and GameStop.

“It’s quite depressing to see some brokers in the crypto ecosystem copying and repeating this batched delivery of the real assets, like the old T+2 delivery of the stock market into the crypto market,” Gigo said. “But the blockchain never sleeps, and so we have instant settlement within our platform.”

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Nvidia Estimates Ethereum Miners Contributed 2%-6% of Q4 Revenue

5 years 7 months ago

Nvidia says Ethereum mining activity contributed very little to its Q4 2020 revenue.

Although it lacks “the ability to accurately track or quantify” the end uses of its graphic processing units (GPUs), Nvidia CFO Colette Kress said the company estimates that between $100 million and $300 million—a “relatively small portion”—of Q4 revenue came from Ethereum miners buying GPUs to use in their mining equipment.

Nvidia reported a total of $5 billion in revenue for the Q4, implying mining sales represented 2%-6% of total.

Related: Arcane Research: Banking on Bitcoin – The State of Bitcoin As Collateral

Ethereum’s hash rate has grown 124% in the past year, according to data from Coin Metrics, in tandem with the general cryptocurrency market’s rally. This has driven demand for Nvidia’s GeForce RTX 3060 graphics card, much to the dismay of the company’s gaming customers. In the future, though, miner-contributed revenue for Nvidia is likely to come from purchases of another of the company’s products.

Nvidia earlier this week said it’s altering its GeForce RTX 3060 graphics card to limit its own efficiency if the card detects it’s being used for Ethereum mining, a move designed to ensure GPU supply is available to gamers. “We would like GPUs to end up with gamers,” Kress said on the company’s earnings call Wednesday.

To serve the mining community, the company is launching Cryptocurrency Mining Processors (CMPs), which are “optimized to improve Ethereum mining” and will give the company “more visibility” into the share of revenue contributed by cryptocurrency miners, Kress said.

Nvidia plans to sell its new CMPs to industrial Ethereum miners and expects the mining-specific product to generate roughly $50 million in revenue during its first quarter of sales. Nvidia also plans to quantify miner revenue contributions in all future quarterly earnings reports.

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US Central Bank Explains ‘Preconditions’ for a Digital Dollar

5 years 7 months ago

Hours after U.S. Federal Reserve Chairman Jerome Powell declared 2021 to be a pivotal year in consulting the public on the digital dollar, his underlings issued a paper describing what that consultation might look like.

In a Wednesday FEDS Notes, Fed Reserve Senior Counsel Jess Cheng, Payments Specialist Angela N. Lawson and Technology Lab Manager Paul Wong said the onus would be on broadly engaging the public regarding the pros and cons of a U.S. central bank digital currency (CBDC). 

Privacy issues, ease of use, security access and delivery mechanisms should all be on the table as Fed officials work to “sharpen” a digital dollar with the public’s help, the paper said. 

Related: Nvidia Estimates Ethereum Miners Contributed 2%-6% of Q4 Revenue

And any consultation should likewise include as broad a cross-section of the U.S. population as possible. 

“Engaging with individuals and businesses and consulting with consumer groups, community organizations, and business associations to understand the use case for a CBDC will help in the decision whether to issue a CBDC and its potential design,” the authors wrote.

Think tanks and academia could also play a supporting role, they said. 

The authors also outlined the basic “preconditions” essential to the Fed’s deliberations on how to proceed. 

Digital dollar clarity

Related: Arcane Research: Banking on Bitcoin – The State of Bitcoin As Collateral

The Fed would need to clearly understand what a possible CBDC would be used for, the notes said. The technology used would also have to support the CBDC across different conditions while providing 24/7 instant settlement, secure transfer of assets and resilience. 

Feedback should be drawn from “end users of various ages, geographic locations, payment habits, and financial literacy in the design and testing of a CBDC could help sharpen the basic features of a viable CBDC arrangement,” the note stated.

Its authors admitted a CBDC could grant the central bank “unprecedented” access into the financial goings-on of its users if designed to allow the most “granular transaction information” to shine through. 

“This close linkage between money and data contrasts with physical banknotes, which do not carry with them transaction data that can be connected to a specific person and their history of financial dealings,” the note said.

Congressional oversight

Congress would have to authorize the Federal Reserve to issue a general-purpose CBDC, the note said. Fed Chairman Powell echoed this view in testimony before the House Financial Services Committee Wednesday, telling lawmakers the Fed would need “legislative authorization.”

Any digital dollar would be controlled as a centralized project by the Federal Reserve, though the actual nodes would be distributed, said James Cunha, a senior vice president at the Boston branch of the U.S. central bank.

The Boston Fed has been evaluating different technology platforms, including blockchain tools, with the MIT Digital Currency Initiative to determine what platform would be best suited to supporting a digital dollar.

However, support for the idea of a digital dollar, whether blockchain-based or not, seems to be growing. Treasury Secretary Janet Yellen said earlier this week “it makes sense” for central banks to consider issuing their own digital currencies. 

“Too many Americans don’t have access to easy payments systems and banking accounts, and I think this is something that a digital dollar, a central bank digital currency, could help with,” she said at a New York Times conference on Monday (while also dismissing Bitcoin as being an inefficient system for payments).

Wednesday’s paper dropped just after a Fedwire outage that saw banks unable to transfer funds. Some crypto exchanges were unable to process ACH transactions during the outage.

Nathan DiCamillo contributed reporting.

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Serbian Man Indicted for Embezzling $7M Through Fraudulent Crypto Schemes

5 years 7 months ago

A Serbian man has been charged in an indictment filed Tuesday for embezzling $7 million from U.S. investors through two fraudulent cryptocurrency platforms.

  • According to the indictment, Kristijan Krstic, 45, was the founder of “Start Options” and “B2G,” two digital-asset investment platforms, which fraudulently induced U.S. investors to purchase securities in the form of investment contracts.
  • Start Options purported to provide cryptocurrency mining and trading services, while B2G claimed to be an “ecosystem” for the exchange of B2G tokens, cryptocurrency and fiat money.
  • The money invested by users was laundered through a Philippines-based account and digital currency wallet.
  • $7 million was then transferred to Krstic via a promoter in the U.S. at which point he stopped responding to communications, tweeting that “the time has come to find new challenges and opportunities.”
  • Krstic had previously communicated with investors using the alias “Felix Logan” and the Twitter handle “@felixlogan_cfo”.

See also: Serbian Man Extradited to US After Being Indicted in $70M Crypto Fraud

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Market Wrap: Bitcoin Stabilizes Around $49K After Two Extremely Volatile Trading Days

5 years 7 months ago

Bitcoin has reversed its biggest two-day loss since March 2020, as prices returned to as high as above $51,000 on Wednesday after the derivatives market calmed down from an over-leveraged condition.

  • Bitcoin (BTC) trading around $49,119.46 as of 21:00 UTC (4 p.m. ET). Gaining 3.17% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $47,032.52-$51,445.67 (CoinDesk 20)
  • BTC trades below its 10-hour and 50-hour averages on the hourly chart, a bearish signal for market technicians.

Bitcoin’s heavy losses earlier this week represented a retreat from price levels that some analysts characterized as euphoric. 

But as prices stabilized around $49,000 on Wednesday, signs emerged that some of the excessive leverage had been wrung out of the market, implying the potential for a fresh more to the upside, analysts said. 

Related: Nvidia Estimates Ethereum Miners Contributed 2%-6% of Q4 Revenue

The cost to fund bitcoin perpetuals swaps trades – a common way of betting on price movements in cryptocurrency markets, similar to futures contracts changes – have returned to “neutral territory,” according to the analysis firm Arcane Research. Prices even briefly traded above $51,000 on Wednesday after dipping below $45,000 on Tuesday.

Trading volumes on major exchanges have subsided following a furious level of activity in the past two days, with some $20 billion changing hands Monday and Tuesday on eight major exchanges tracked by CoinDesk. By late Wednesday, volume had registered just  $4 billion.

On the technical charts, Wednesday has been an “inside day” for bitcoin, meaning the price range is completely within the bounds of prior day’s high-low range, according to Katie Stockton, a technical analyst for Fairlead Strategies.

“This preserves the pullback despite the $50,000 threshold having been cleared,” Stockton said. “It appears that there is a short-term risk to the latest breakout point at the January high just below $42,000, which would be a natural support level.”

Related: Arcane Research: Banking on Bitcoin – The State of Bitcoin As Collateral

Also supporting bitcoin’s quick recovery from the sell-off is rising demand from investors who bought the price dip, expecting long-term gains. 

“Bitcoin has rebounded from yesterday’s sell-off, with both retail and institutional investors using the fall in prices to add to their positions,” Simon Peters, crypto asset analyst at multi-asset investment platform eToro, said, citing Square’s new $170 million investment in bitcoin.

MicroStrategy, the business intelligence company led by CEO Michael Saylor that recently has become better known for its bitcoin holdings, said Wednesday it has bought another $1.03 billion worth of the cryptocurrency.

“With yet more endorsements from leading figures in the world of finance and technology, the direction of travel longer-term is clear – bitcoin and its peers are here to stay and are getting more integrated in our lives,” Peters said. “This bodes well for future prices.”

Not just in the West. The demand in bitcoin has increased in China, evidenced by the rising price of dollar-pegged stablecoin tether (USDT) denominated in Chinese yuan since last week,on over-the-counter trading desks.

Ether reverses losses from early sell-off

Ether (ETH), the second-largest cryptocurrency by market capitalization, was higher on Wednesday, trading around $1,605.26 and climbing 5.55% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

Ether continues to trade in sync with bitcoin and the correlation between the two cryptocurrencies  has strengthened since Friday.

Meanwhile, ether is still overbought on the technical charts, indicating that further sideways or “choppy” price action is expected in the coming months, said Fairlead Strategies’ Stockton.

Other markets

Digital assets on the CoinDesk 20 are mostly in green Wednesday. Notable winners as of 21:00 UTC (4:00 p.m. ET):

Notable losers:

Equities:

Commodities:

  • Oil was up 2.55%. Price per barrel of West Texas Intermediate crude: $63.24. 
  • Gold was in the red 0.12% and at $1802.94 as of press time.

Treasurys:

  • The 10-year U.S. Treasury bond yield climbed Wednesday jumping to 1.384%.
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Andreessen Horowitz Leads $25M Round in Ethereum Scaling Solution

5 years 7 months ago

Ethereum scaling solution Optimism will launch its mainnet this coming month after announcing a major investment from Andreessen Horowitz (a16z) that closed in November.

“We’ve spent a great deal of time looking at various approaches and teams building Layer 2s, and today we’re thrilled to announce we are leading a $25 million Series A investment in Optimism,” a16z’s Chris Dixon and Arianna Simpson wrote Wednesday. “Optimism’s exceptional team, carefully designed developer experience, major scaling benefits, years of research and testing, and full composability made it the obvious choice.”

Optimism is among a small cohort of firms looking to boost Ethereum’s famously choked throughput. The startup was initially planning on rolling out a testnet in March, although decentralized finance (DeFi) exchange Synthetix already began on-boarding the tech stack in January.

Related: Nvidia Estimates Ethereum Miners Contributed 2%-6% of Q4 Revenue

“As a result of being able to hire this kind of talent, we will be launching arbitrary contract deployment on mainnet in March instead of public testnet,” Optimism said in blog post Wednesday. The startup added seven new members to the team as well, including talent from Coinbase, Handshake and Casa.

Earlier today, DeFi venue dYdX announced it was building on StarkWare’s ZK-Rollups, a competing solution for boosting the number of transactions a blockchain can handle.

Optimism did not return a request for comment by press time.

Update (Feb. 24, 23:45 UTC): Adds information on Optimism‘s mainnet launch and the purpose of the funding round.

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FedWire Is Back Online After Outage That Affected Crypto Exchanges, Others

5 years 7 months ago

The U.S. Federal Reserve has restored access to its real-time settlement system for central bank money. 

The outage affected wire transfers that were in the process of being settled or already in the queue. During the outage, cryptocurrency exchanges including Gemini, Kraken and Coinbase were seeing delays in some transactions. Those problems should now be resolved.


“The Fedwire Funds Service, Fedwire Securities Service, and National Settlement Service have resumed processing and are operating normally,” the central bank wrote in an updated note. “The Federal Reserve Banks have taken steps to help ensure the resilience of the Fedwire and NSS applications, including recovery to the point of failure.”

Related: Nvidia Estimates Ethereum Miners Contributed 2%-6% of Q4 Revenue

This kind of failure is very rare for bankers to experience.

“Maybe it’s happened to us twice in 11 years,” Steve Schnall, CEO of Manhattan-based Quontic Bank said. 

Read more: Outage at the Fed Delays Bank Wire Transfers, Affecting Crypto Exchanges

For Quontic, a separate banker’s bank with direct access to the Fed was able to handle its wires during the downtime, Schnall said. 

Related: Arcane Research: Banking on Bitcoin – The State of Bitcoin As Collateral

“I’m not sure if many or all have such a relationship,” Schnall said. “The bigger banks wouldn’t need [a correspondent bank] as they typically have direct access to the Fed.”

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Gold and Bitcoin Won’t ‘Cannibalize’ Each Other: Goldman Sachs Analysts

5 years 7 months ago

Bitcoin isn’t going to eat gold’s lunch anytime soon, according to Goldman Sachs analysts. But here’s the kicker: They said gold won’t be displacing bitcoin, either.

“In an environment of broadband dollar weakness and still very low and negative real rates we do not see either asset cannibalizing each other and see enough room for both,” wrote four Goldman analysts in a Wednesday research note obtained by CoinDesk.

The note, predominately a rather bullish take on gold’s 2021 trajectory, cast the two commodities as inhabiting different ends of the investment spectrum: Gold remained the “defensive” play while bitcoin was more “risk-on.” Bitcoin “serves a different role in portfolios vs. gold,” the analysts said, primarily because of the crypto’s legendary volatility.

Related: Nvidia Estimates Ethereum Miners Contributed 2%-6% of Q4 Revenue

They attributed gold’s underperformance last year to a rotation into riskier asset classes but did not elaborate on what role bitcoin may played had in that move, as JP Morgan did last December.

On the correlated assets front, the analysts steered clear of comparing gold directly to bitcoin. (That correlation turned negative in December.) But they noted a very strong correlation between bitcoin and non-precious metals – copper, tin, zinc – that have moved steadily upward since October.

“Since the end of last year bitcoin has displayed a pretty tight correlation with base metals as both act as risk on inflation hedges with appealing long term growth stories,” the analysts wrote.

Goldman’s analysts said cryptocurrencies are uniquely sensitive to sudden, investor- and influencer-driven price movements. They pointed to Ripple’s XRP token, which tanked as word of the U.S. Securities and Exchange Commission’s unregistered securities lawsuit began to spread (the price has largely recovered, however).

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Bank Analysts Clash on Square Price Targets After Q4 Results

5 years 7 months ago

At least two major banks walked away from Square’s Q4 earnings report with diverging viewpoints on which direction the payments company’s share price, which was at about $256 at the time of the company’s earnings release Tuesday afternoon, will head next, according to investor notes viewed by CoinDesk.

Analysts at Royal Bank of Canada (RBC) gave 19% upside for SQ and upgraded its price target to $305 from $257, predicting the company would “outperform” (roughly equivalent to buy). But their peers at Goldman Sachs, which rates SQ a “neutral,” took the opposite perspective, notching a 4% downside that would put SQ at $246 this time next year.

(Goldman’s rating actually was a slight upgrade from a Feb. 23 “first-take” investor note that targeted SQ at $216.)

Related: Nvidia Estimates Ethereum Miners Contributed 2%-6% of Q4 Revenue

RBC noted “management’s commitment to bitcoin as the currency of the internet” and was bullish on Square’s capitalization of a “multi ecosystem opportunity.” It estimated a 69% jump in 2021 bitcoin revenue that would generate Square $7.75 billion. Goldman was largely mum on the bitcoin upside, downgrading bitcoin revenue estimates for 2021 to $7.23 billion from $7.43 billion.

Even so “the margins on bitcoin revenues has continued to expand,” Goldman’s analysts wrote.

Square’s Cash App generated $4.57 billion in bitcoin revenue in FY2020, contributing $97 million to gross profit.

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BitcoinPaperWallet ‘Back Door’ Responsible for Millions in Missing Funds, Research Suggests

5 years 7 months ago
  • BitcoinPaperWallet.com appears to feature a back door in its code that shares private keys for its paper wallets with anyone who has access to the website’s backend.
  • CoinDesk has spoken to BitcoinPaperWallet users who collectively claim to have lost millions of dollars worth of bitcoin.
  • Blockchain analysis shows these funds flowing to Binance and Poloniex exchanges.
  • The unfortunate scenario is a reminder that, in most cases, web-based bitcoin wallet generators should be avoided in favor of vetted bitcoin wallet software and hardware.

It was just past midnight on Jan. 7, 2021, when “Nick Wendell” (a pseudonym) lost half a million dollars in bitcoin.

Bitcoin’s price was roaring toward $40,000, and Wendell was moving some of his bitcoin to a paper wallet generated by BitcoinPaperWallet.com. These wallets allow you to store your private key on a pdf that can then be printed out or saved as a computer file.

Within a minute of depositing 14.5 BTC, worth over $500,000 at the time (and now worth over $700,000), it was all gone. Someone had swept the funds from Wendell’s wallet and, after playing blockchain hopscotch across multiple addresses, sent them to the Binance exchange.

Related: Nvidia Estimates Ethereum Miners Contributed 2%-6% of Q4 Revenue

The situation set Wendell’s world spinning.

“Within one minute I realized what happened and it felt like I was falling but [wouldn’t] hit the ground for several minutes. I remember walking in circles around the kitchen as if I were dizzy,” Wendell told CoinDesk.

Wendell is one of at least half a dozen users who claim to have lost dizzying sums to the paper wallet. A quick Google search reveals posts on Reddit, Bitcointalk and elsewhere that tell several individual accounts of a multi-million dollar collective heist: Someone with access to the site appears to be filching user funds through a back door in the code that gives them access to private keys.

In fact, some users of the most popular bitcoin paper wallet generator on Google’s search ranking claim to have collectively lost millions of dollars worth of bitcoin over the past two years, CoinDesk has learned.

Related: Arcane Research: Banking on Bitcoin – The State of Bitcoin As Collateral

It’s poetic if tragic that something called a “paper wallet” is so fragile. While it might seem intuitively sensible to store your bitcoin offline on a slip of paper or a USB drive to protect it from hackers, doing so can be fraught with risk.

Before loss or degradation, a couple of risks associated with storing bitcoin this way, the primary concern is private key generation – in other words, how you are creating your private keys. If you’re using a third-party software to generate a paper wallet, you’re trusting that the generator creates the private key securely.

If the software isn’t honest, then your wallet is vulnerable at its core.

The BitcoinPaperWallet.com back door

According to security researchers, BitcoinPaperWallet.com sends a copy of every private key it generates on behalf of its users to the site’s servers. Whoever has access to the BitcoinPaperWallet’s back end can then access these keys and steal the funds associated with wallets generated on the site.

Colin and Bryan Aulds, two brothers who run the PrivacyPros blog, nearly purchased the website last year. But after they were tipped off to the series of heists during the negotiation process, they began investigating it for fraud and published their findings on their blog. 

If you have the MetaMask or MyEtherWallet (MEW) extensions installed on your computer, the app will automatically redirect you to a page warning you that BitcoinPaperWallet.com unsafe. According to MetaMask, the site is registered on their “domain warning list” because “it has been explicitly identified as a malicious site.”

In May of last year, Ethereum wallet provider MyCrypto released a video and tweet thread warning about a “vulnerability” in BitcoinPaperWallet which creates “a back door that leaves you at risk of your funds being stolen.”

The Aulds brothers mention that the code for this particular exploit no longer exists in BitcoinPaperWallet’s build. But something new has replaced it and people are still losing money because “someone is actively changing [the back door] once the current exploit is published widely,” Bryan Aulds told CoinDesk.

CoinDesk spoke with some of the wallet’s victims. One, who asked to remain anonymous, had made incremental deposits into his wallet throughout August 2020. On the 21st of the month, his funds were gone, on their way to the Binance exchange.

“I mistook it for another legit website that I had used years ago. Basically, I googled ‘Bitcoin paper wallet’ and this scam comes up first,” they told CoinDesk.

Another victim interviewed by CoinDesk lost 50.1 BTC in December. The person deposited funds into a wallet generated by the website, went to get a COVID-19 test and came back to find an empty wallet address.

Still another, who also asked to remain anonymous, lost 1.8 BTC in May 2019. One user on Reddit reported losing BCH to the site as well.

How does the exploit work?

When you create a bitcoin wallet, you have to generate a private key that gives you access to and control over the wallet. To do this, most wallet softwares use a random number generator that multiplies one really long random number by another to generate a private key.

One Reddit user, Senor_Curioso, diagnosed how BitcoinPaperWallet’s key generation process appears to be used to steal funds in this Reddit thread. Per the explanation, the wallet generator automatically creates the seed for you when you load it up.

“When you load the wallet generator from the server, it dynamically embeds 60 random number seeds which hide in the HTML as ‘test keys,’” Curioso said. 

Curioso told CoinDesk the test key is, in fact, the wallet’s private key. 

When you generate one of BitcoinPaperWallet’s wallets to create the private key yourself, you have to move your mouse across a pop-up window to create the ‘randomness’ needed to generate a cryptographically secure key.

But “when the generator makes your wallets,” Curioso explained, “the cryptographically secure random seed you made by moving your mouse around is ignored. Instead, those ‘test keys’ are used as seeds to generate predictable public and private keys. … The proof: If you eliminate all but one of the ‘test keys’ in the HTML code, the wallet will simply generate the same private and public key over and over. There is no randomness.”

Since these keys are likely saved on BitcoinPaperWallet’s server, anyone who has access to the site’s backend can sweep them at will, he concluded.

A developer for PrivacyPros vetted Curioso’s findings and confirmed the presence of the back door code. He added that the test_key code for generating the private key behind a user’s back “isn’t present in the source code” on the BitcoinPaperWallet’s Github originally authored by its creator; the back door code had been added at a later date.

Dustin Dettmer, an independent Bitcoin developer and researcher, verified the findings as well.

Who owns BitcoinPaperWallet?

Up until 2018, BitcoinPaperWallet was owned and operated by Canton Becker, but it was sold to Sarkis Sarkissian in April of that year.

It wasn’t until after the sale that people began reporting losses from wallets generated on the site. Before the shadow play, one source commented, the wallet generator “was a well-known and trusted website used by the Bitcoin community.”

There’s no way to attribute the alleged thefts to any one person with certainty, but that person would have required access to the website’s code in order to sweep the funds. Unlike a phishing scam, where an outsider tricks you into revealing your private key or sending funds to the wrong address, this back door is internal to BitcoinPaperWallet’s design.

One user told CoinDesk he lost 22.5 BTC to the website in mid 2018. By early 2019, others on social media began reporting stolen funds (one of whom lost 22.15 BTC).

When CoinDesk reached out to Sarkissian to request comment on the back door in the wallet’s code, he attributed the losses to “users who never had proper key management in the first place.”

“Indeed, we’ve received complaints from users who claim to have lost their bitcoin using our website. Those complaints are always resolved except for a select few who cannot fathom it was their own fault and must place the blame on us.”

When asked again to clarify if he knew of a back door in his wallet generator’s code, Sarkissian said, “We have searched our source code for the issues present in those documents and we cannot reproduce the same results. Our servers and source code has been verified clean by [our security expert Jonel Richard]. He is still on retainer and continues to investigate, trying to reproduce the issue found by others.”

CoinDesk reached out to Richard to ask for a copy of his analysis but did not hear back by press time.

Both Wendell and another victim have filed police reports with their respective police departments but nothing has come of the investigations thus far. 

BitcoinPaperWallet scams larger holders

BitcoinPaperWallet appears to have featured flawed code since at least the middle of 2018, so how did it go under the radar for so long?

It seems the thief only drained high-value bitcoin wallets or those with at least 1 BTC deposited, not pocket change or smaller sums.  According to social media and first-hand accounts, the culprit has stolen at least 124.85 BTC valued at roughly $6.2 million at today’s prices.

BitcoinPaperWallet’s back door is a reminder that, for small or large amounts, storing your bitcoin on a wallet generated from a website is probably not a good idea. In fact, unless you know what you’re doing and generate the paper wallet yourself from scratch, you should just stick with a hardware wallet from a well-known, verified manufacturer and, if you can, secure your funds with a multisignature wallet.

“It is critical wallet generation be completed by a trusted manufacturer in an entirely offline process,” Dettmer told CoinDesk. “You should think of websites, your computer, and the internet generally as trying to voyeuristically get a peek at your seed. Because sometimes they are — and they can steal your entire balance if they succeed.”

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Outage at the Fed Delays Bank Wire Transfers, Affecting Crypto Exchanges

5 years 7 months ago

The U.S. Federal Reserve’s payments network for sending wires and settling those transactions in real time is down, according to frbservices.org. 

“A Federal Reserve operational error resulted in disruption of service in several business lines,” said Richmond Fed spokesman Jim Strader. “We are restoring services and are communicating with all Federal Reserve Financial Services customers about the status of operations.”

In the post on Wednesday, the central bank said its investigating service disruption to Fedwire, FedACH, and national settlement. 

Related: Nvidia Estimates Ethereum Miners Contributed 2%-6% of Q4 Revenue

As a result, cryptocurrency exchanges like Gemini, Kraken and possibly Coinbase are seeing delays in Fedwire and automated clearing house (ACH) transactions. 

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Planning to Short Bitcoin? Better Check China’s ‘Tether Premium’ First

5 years 7 months ago

Bitcoin’s rapid recovery from the biggest two-day sell-off in almost a year shows the power of a recently overlooked factor in cryptocurrency markets: demand from Chinese retail traders.

Prices for the largest cryptocurrency were higher on Wednesday, stabilizing around $49,000, after tumbling 15% in the prior two days.

The sudden demand for bitcoin (BTC) from Chinese traders, possibly motivated by the price drop, can be viewed through a hitherto largely ignored metric: the “tether premium” – or the difference between prices quoted in yuan on the dollar-linked stablecoin tether (USDT) by over-the-counter cryptocurrency traders, and the implied yuan-denominated price for tether based on the prevailing rate in global markets.   

Related: Nvidia Estimates Ethereum Miners Contributed 2%-6% of Q4 Revenue

Under normal market conditions, tether should have depreciated against the yuan because the Chinese currency was appreciating against the dollar in foreign-exchange markets. However, tether denominated in Chinese yuan has traded at a premium since last week, ostensibly due to elevated demand from the country’s traders, who routinely use the stablecoin as an on-ramp to crypto markets. The practice of trading directly from government-issued currencies is still banned in China.

“More Chinese investors have begun to enter the market, even though the bull market since 2020 has been mainly driven by U.S.-based institutional investors,” Flex Yang, founder and chief executive officer of Hong Kong-based crypto lender Babel Finance, told CoinDesk. “Chinese investors, especially those with very little bitcoin exposure, are now looking for channels to buy bitcoin. And buying bitcoin through USDT is the most direct channel, which led to an increased demand for USDT in the [over-the-counter] market.”

Tether has been sold at premium on Huobi OTC since last Friday, according to a spokesperson from the parent crypto exchange Huobi. The premium went as high as 2% on Tuesday. Under normal market conditions, the premium is zero or negligible.

“As people rush into the market in a bull run, the demand for USDT rises significantly,” Ciara Sun, vice president of Huobi Global Markets, told CoinDesk. “OTC merchants will also take the opportunity to raise prices that are far beyond the exchange rate.”

Related: Arcane Research: Banking on Bitcoin – The State of Bitcoin As Collateral

At OKEx, another Asia-focused cryptocurrency exchange, its over-the-counter desk also saw rising prices for tether, when denominated in Chinese yuan. 

“Some traders are buying tether in order to buy the general dip in the market,” said Robbie Liu, a market analyst at OKEx Insights.

Liu said the so-called tether premium doesn’t simply imply rising demand for cryptocurrencies from new investors because during a volatile market many experienced traders will buy more tether to maintain margin requirements on leveraged positions. 

The renewed interest in bitcoin and other cryptocurrencies from the retail market in China, which was the main driver of the last crypto bull market in 2017, might stem from mainstream media coverage in China, said Mable Jiang, a principal at crypto investment firm Multicoin Capital. She pointed out that people in China have been buying the market dip in the past few days.

In a rare report on Sunday, CCTV 2, the state-controlled finance television channel, gave an update on the bitcoin market, claiming the cryptocurrency’s return since March 2020 has surpassed 1,300%. The stated performance record reflects what is perhaps the most bullish framing of bitcoin’s price run because it uses last year’s lows as the starting point and goes through the recent all-time high price above $58,000. But it’s not wrong. 

The TV channel’s report continued by elaborating on Bill Gates’ changing attitude towards bitcoin (he’s neutral now instead of negative) and ARK Investment’s Cathie Wood’s support of bitcoin.

“As bitcoin continues rising, more and more corporates have announced that they are considering bitcoin as part of their asset allocation,” the news anchor said on CCTV 2.

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Craig Wright Demands Bitcoin Developers Give Him Access to Stolen Mt. Gox Coins

5 years 7 months ago

Craig Wright’s legal pursuits have leapfrogged from threatening to sue Bitcoin contributors over their hosting the Bitcoin white paper to a legal threat that sets his sights on bitcoin connected to the Mt. Gox hack.

The Bitcoin SV progenitor and self-proclaimed Bitcoin creator sent a Letter Before Action to Bitcoin Core contributors this week through his law firm, Ontier LLP. In the letter, Wright’s Tulip Trading Ltd. (TTL) demands access to two wallets that contain 31,000 and 79,957 BTC.

The wallets, curiously, are connected to the hack that drained 800,000 BTC from the world’s then most-popular bitcoin exchange in 2014. Wright claims the bitcoin in the wallets were stolen from him last year.

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Even though Bitcoin Core contributors have no control over the network’s wallets, Wright wants Bitcoin’s developers to hand him the keys. 

“In accordance with their fiduciary duties,” the letter reads, “each of the Developers is obliged to: a. Provide access and control to TTL of the BTC in the Addresses, which it owns but cannot access or control due to the hack/theft. b. Take all reasonable steps to ensure that TTL has access to and control of the BTC in the Addresses.”

The letter alleges that “on or around 5 February 2020, unknown hackers stole the private keys for the Addresses and deleted copies of the keys on Dr Craig Wright’s computer, preventing him from accessing the digital assets at those Addresses, which he operated on behalf of TTL.”

‘Doomed to failure’

Craig Wright has made repeated headlines for his unsubstantiated claim that he is Bitcoin’s creator, Satoshi Nakamoto, and he has even sued those who have challenged this claim. Most recently, he threatened to sue for copyright infringement Bitcoin Core contributors who hosted Bitcoin’s white paper.

Related: Arcane Research: Banking on Bitcoin – The State of Bitcoin As Collateral

Ontier LLP says the letter could materialize into legal action if the recipients do not comply. However, the request in the letter – for Bitcoin developers to seize funds in Bitcoin addresses they don’t own – is literally impossible. To seize these funds would require the multi-million (if not billion) dollar endeavor of reorganizing Bitcoin’s blockchain history with a 51% attack. The developers could also fork the blockchain to seize the funds, but that blockchain would not be Bitcoin – it would be just another fork.

For myriad reasons, Stephen Palley, a partner at Anderson Kill law firm, told CoinDesk “a lawsuit like this is doomed to failure.”

“While I can’t speak to English law, the notion that a bunch of open-source developers will be compelled to fork public blockchains and require miners and nodes to adopt the fork so that Wright can receive funds that he claims were stolen is, in my opinion, not credible. [It] will do nothing more than force people to pay legal fees – all of which are likely going to be owed by Wright.”

Palley, whose firm is not involved in this lawsuit, said the claim that open-source developers owe Wright fiduciary obligations and damages for losses in absence of a contract “is novel and faces considerable legal and factual problems.” 

“I can tell you with near certainty that any judgment in that case would not be enforceable in the U.S. And I doubt it will get very far in English courts either. I’m hopeful that the Bitcoin community will come together as it has in the past and provide support to any developer who has received these letters. We’ve already heard from some people who are outraged by this maneuver and expect to hear from more,” Palley concluded.

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MicroStrategy, Square Bought Bitcoin High, Then the Price Fell

5 years 7 months ago

This article is excerpted from Blockchain Bites, a daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here. 

At stake A big day for bitcoin balance sheets

MicroStrategy purchased another $1.026 billion in bitcoin Wednesday, bringing its total hoard to 90,531 BTC, worth some $4.78 billion. The business intelligence company, which is now better known for its bitcoin evangelism than its actual products, issued zero-interest debt to finance the purchase – in some sense making it a de facto bitcoin exchange-traded fund. CoinDesk’s Danny Nelson gives an overview of CEO Michael Saylor’s increasingly bombastic bitcoin pitch.

Square also bought more bitcoin, paying approximately $170 million for 3,318 BTC. It executed the deal with an average price per coin of $51,235.70, meaning the investment is in the red. It should be said, MicroStrategy’s most recent BTC allocation is also worth less than the dollars invested.

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Why does this matter? Square putting 5% of its balance sheet into bitcoin is a huge vote of confidence for the asset. However, as CoinDesk’s Nathan DiCamillo notes, buying at market tops could prove JPMorgan’s theory that few non-crypto companies are likely to follow in MicroStrategy, Telsa or Square’s footsteps given bitcoin’s volatility.

Still, as Square proved, there are ways to make money with bitcoin that don’t involve direct investment. The revenue it made from selling bitcoin on Cash App swelled to $4.57 billion in 2020, clocking $97 million in gross profit.

Other stories

Alameda Research is leading a $40 million investment into Oxygen, a Solana-based platform that aims to become a Robinhood for decentralized finance (DeFi). Multicoin, CoinDesk sister company Genesis Capital and CMS joined the round. The platform will be integrated into the Google Maps alternative Maps.me, in which Alameda has previously invested. CoinDesk’s Ian Allison dives in.

CoinShares has launched a new Ethereum exchange-traded product (ETP), with each share backed by .03 ETH. The EPT will trade on the Swiss SIX exchange and already has around $75 million in assets under management (AUM).

Related: Arcane Research: Banking on Bitcoin – The State of Bitcoin As Collateral

NFTs are having a moment and causing confusion as to what exactly these tokens are. CoinDesk’s Brady Dale explains the tech behind the trend. People have paid $600,000 for a Nyan Cat NFT and over $1 million for a CryptoPunk, but in most cases, the image or media being represented doesn’t live on the blockchain – meaning those files could be taken offline. Stakeholders are working on solutions to the issue, though the industry has yet to settle on best practices.

Canadian bank VersaBank will soon launch a stablecoin for commercial use. In what’s claimed as a first, the VCAD stablecoin is issued and backed by deposits at a North American bank and will be redeemable for Canadian dollars.

Meanwhile, the East Caribbean Central Bank has executed the first retail transaction for its “DCash” digital currency. The transactions took place in a supermarket in Grenada on Feb. 12, and could eventually see use across the Eastern Caribbean Currency Union trading bloc. Digital finance startup Bitt is a technology provider for the project.

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Fed Chairman Powell: We Will Engage the Public on the Digital Dollar This Year

5 years 7 months ago

Nearly every time an elected official has asked U.S. Federal Reserve Chairman Jerome Powell about the digital dollar, he’s emphasized caution and risk to the stability of the U.S. financial system.

Wednesday, however, Powell went further while speaking before the House Committee on Financial Services, saying the U.S. central bank would “engage with the public” on the digital dollar this year, giving a timeline to the central bank digital currency’s development for the first time.

“This is going to be an important year,” Powell said of the digital dollar project. “This is going to be the year that we engage with the public pretty actively including some public events that we are working on, which I’m not going to announce today.”

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Powell emphasized that the Fed won’t make decisions and then present them to the public but will talk with Americans about the trade-offs involved with the digital dollar project. 

“There are both policy questions and technical questions that relate between those two and they’re very challenging questions,” Powell said. “We’re going to have a public dialogue … in the meantime we’re working on technical challenges and also collaborating and sharing work with other central banks around the world.” 

Beating a familiar drum, Powell also emphasized the central bank would be careful about designing a digital dollar that doesn’t “undermine … healthy market function.” 

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Bitcoin More Popular Than Gold in Australia, Report Finds

5 years 7 months ago

A report by a Melbourne-based cryptocurrency exchange found that bitcoin is more popular among investors than gold in Australia.

  • Crypto exchange BTC Markets’ report surveyed 2,000 investors in Australia, finding that 12.6% held cryptocurrency compared to 12.1% holding precious metal, Motley Fool has reported.
  • Around one in three crypto investors have made their first investment since March 2020 when the stock markets plunged at the outset of the COVID-19 pandemic.
  • Nearly a quarter of these investors state they plan to hold their investments for more than three years.
  • BTC Markets CEO Caroline Bowler claims that a year ago crypto investors tended to be men aged 24-45, but they now include more retirees, high-net-worth individuals and institutional investors, the Sydney Morning Herald reports.
  • About a quarter of investors holding crypto earn more than $AUS 100,000 ($79,000) a year.

See also: Australia’s Blockchain Ecosystem Needs More Support From Regulators, Says Industry Body

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Opera Adds In-Browser Crypto Options With Simplex Integration

5 years 7 months ago

Opera, an online browser that claims to prioritize user privacy, has partnered with crypto-to-fiat onramp provider and payment processor Simplex to offer a crypto onramp for users of the browser. 

A crypto on-ramp is basically an exchange or similar service that lets users pay fiat for crypto and is an important first step for newer crypto users. The move comes as bitcoin and cryptocurrencies generally have seen large financial institutions get involved and exponential price increases in 2021. 

The result of the integration is that users will be able to buy and sell a range of cryptocurrencies quickly within the Opera browser. 

Related: Canadian Bank Launching Fiat-Backed Digital Currency in Claimed World First

The biggest takeaway for current Opera and Simplex users is that it makes on-ramping more accessible, according to Rachel Siegman, head of marketing at Simplex.  

“Current Opera users can onramp using their debit or credit card with Simplex and Simplex users can now use the secure and instant payments on Opera,” she said in an email. 

Opera browser

Initially released in 1995, Opera is one of the oldest continuously developed browsers in the world today and features a built-in VPN and ad blocker. 

Read more: Opera’s Built-In Crypto Wallets Have 170K Monthly Active Users

Related: New Social Media Platform Instars Leverages Privacy-Enhancing Cryptography

In 2018, it launched web3 support, a decentralized application (dapp) explorer, and its native crypto wallet in Opera for Android, making it one of the first web3 and blockchain-ready browsers. Opera’s wallet currently supports ETH, BTC, and Tron. Simplex will make it easier to buy major coins such as BTC and ETH. Now a user can go into the Opera browser app, select what crypto they want and choose ‘buy’, selecting Simplex according to Siegman. 

Opera currently has over 380 million users worldwide. 

Simplex

Launched in 2014, Israel-based payments processor Simplex became a principal member of the Visa network in December 2020, meaning the company has permission to issue Visa debit cards, giving its consumers access to digital currencies daily.

Read more: Payments Firm Simplex Becomes Visa Principal Member

“We’re excited to work with leading fintechs like Simplex [that] are helping to enable simple, secure and compliant conversions between crypto and fiat and the ability to spend these funds at Visa’s network of more than 60 million merchants,” said Cuy Sheffield, senior director and head of cryptocurrency at Visa at the time. 

Last month, licensed by the EU, Simplex also launched Simplex Banking, which works with its partner network “to enable users to buy crypto with a range of local and global payment methods and convert it back into fiat in a bank account,” according to a statement on the release. 

“It’s completely secure, and using Simplex’s fraud-free network helps all users, throughout the world, enjoy the market dips immediately,” said Siegman of the Opera browser partnership. 

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