CoinDesk Crypto

The former chief technology officer of a prominent blockchain company has forgotten the password to a fortune in bitcoin.

• Almost a decade ago, Stefan Thomas, the former CTO at blockchain company Ripple Labs, was given 7,002 bitcoins worth $2-$6 each for making a cryptocurrency explainer video, reports the New York Times.
• The bitcoin had been stashed away in a digital wallet and Thomas has used eight of his most frequently used passwords in an attempt access his IronKey hard drive and his now multimillion-dollar fortune but has had no luck.
• Two attempts now remain before the device auto-encrypts its contents, leaving Thomas’ fortune in limbo. Just call it Schrödinger’s bitcoin.
• “I would just lay in bed and think about it,” Thomas told the New York Times. “Then I would go to the computer with some new strategy and it wouldn’t work, and I would be desperate again,” added Thomas.
• Bitcoin prices have climbed from  $10,000 to $41,000 over the past three months. The price of bitcoin was at $34,290 at the time of publication, making Thomas’ inaccessible stash worth an estimated $240 million.
• It seems Thomas will have to HODL on for a little while longer until he finds a way to access the bitcoin.

Read more: Meet the Man Who Will Hack Your Long-Lost Bitcoin Wallet for Money

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Two cryptocurrency mining companies want to make it easier for businesses in North America to mine bitcoin.

Minnesota-based Compute North has allocated hosting facilities and 47 megawatts (MW) of power for 14,000 Whatsminer M30S mining machines supplied by New York-based Foundry Digital as part of an agreement to provide a “turnkey” hosted mining solution. (Foundry is a subsidiary of CoinDesk parent company Digital Currency Group.)

Foundry has hosted mining devices with Compute North for over a year, according to Foundry CEO Mike Colyer. This latest batch of miners sent to Compute North for hosting will be deployed in Q1 2021, at which point investors can purchase hosted machines through either company.  

Related: Bitcoin Miner Marathon to Raise $250M in Direct Stock Offering

In the past year, mainstream interest in mining has soared along with bitcoin’s price, causing investors to pile into public North American mining companies and prompting shares of most of these companies to handily outperform bitcoin, as CoinDesk reported. 

But an individual investor’s ability to actually mine is often severely limited by a high barrier to entry thanks to hardware and power resource costs. That barrier stands even higher now as mining machine manufacturers continue to be smothered by overwhelming demand from established players causing a shortage of available machines.

With their new agreement, Compute North’s “low” operating costs and Foundry securing access to future batches of mining machines through its partnership with leading manufacturer MicroBT, the two companies hope to be able to attract would-be miners by being able to significantly lower that barrier to entry.

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A hospital in China sent the first electronic bill to a patient on its blockchain-based invoice management platform on Monday. 

The People’s Hospital of Chengmai County, a public hospital in the Hainan province of South China, is the first hospital to issue and keep track of invoices on a blockchain in the province, according to a report by Chinese state media China News Service. 

While not the first in China, Hainan is one of the few provinces that have successfully incorporated blockchain technology into their public institutions’ online administrative platforms.  

Related: CEX, Lies and Videotape: Binance Accuses Rivals of Fighting Dirty

The hospital sent invoices to so-called “ticket holders” on its patients’ phones. The patients can check the immutable medical and billing records for reimbursement without going to the hospital, according to the report. 

The platform is now only available in the city but it is set to branch out to the rest of the province as the local government is focused on applying blockchain technology to processing official documents for other public institutions. 

“Building on the pilot projects, we will optimize blockchain-based platforms and move more administrative work onto the chain so that government agencies can share information through the same system,” an official from the province’s ministry of finance said. 

The southern Chinese province has preferential economic policies to lure blockchain companies to open offices in the province. The province capital Haikou is home to some of the leading Chinese blockchain companies, including Huobi China. 

Related: Is China Poised to Nationalize Alibaba?

Provincial governments have carried out a variety of blockchain innovation initiatives since Chinese president Xi Jinping called on the nation to “seize the opportunities” to develop the technology in his speech in September 2019. 

The Beijing government unveiled its holistic plan to encourage financial services companies to better serve the capital markets with blockchain technology, while Shanghai included two blockchain projects in its list of 57 strategically important high-tech companies that will receive monetary and intellectual support from the city. 

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Crypto trading platform CrossTower is launching a capital markets desk for institutional clients.

Leading the desk is securities industry veteran Greg Bunn, who’s being hired as CrossTower’s chief strategy officer. Previously, Bunn served as global head of counterparty strategy at foreign exchange giant Citadel, and he also worked in senior roles at Deutsche Bank for more than 16 years.

Expanding from its spot exchange and over-the-counter (OTC) trading desk, CrossTower now offers digital asset lending, trade financing, structured products and trade execution across multiple venues. 

Related: B2C2 Becomes Latest Crypto Market-Maker to Stop XRP Trading: Report

“Ultimately we end up with something that looks and feels a little bit like what you see in the prime brokerage space,” Bunn said. “You can’t centralize the market because it’s by definition decentralized, but you will at least have more connected infrastructure that makes the market more efficient.”

Prime brokers are facilitators for financing and trading for deep-pocketed institutional investors.

Several crypto firms including Bequant, Coinbase, BitGo and Genesis Trading have announced in recent months their plans to build out their prime brokerage arms.

“I would say the biggest fund that we have on board is around $500 million [assets under management],” Bunn said. “What we’ve done is to meet the standards of an industrial-grade regulated securities exchange.”

Related: Two Reasons Crypto’s Bull Market Is Coming

While CrossTower is not targeting retail users with the capital markets desk, it is in discussions with “retail intermediaries” like wallet aggregators about becoming an exclusive partner for trade execution and financing, Bunn said.

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Matt Johnson, Ledger’s new Chief Information Security Officer (CISO), had no choice but to hit the ground not just running but, well, sprinting. His first week of work entailed scrutinizing the fallout from an extensive data dump of customer information, among other areas such as data security and increased attacks that would come as a byproduct of bitcoin pumping. 

In the aftermath of the largest hack in company history, and a little over a week after Johnson started, the hardware wallet company Ledger has announced its first measures to address the data breach and ensure such a hack doesn’t happen again. 

These include working with blockchain analytics firm Chainalysis to hunt the hackers, offering a 10 BTC bounty for information leading to the hacker’s arrest and creating a comprehensive review of what information the company holds onto, where it’s stored and how long it’s retained. 

Related: These DeFi Tokens Have Double-Digit Gains as Bitcoin’s Growth Tapers

Simultaneously, Ledger revealed that because of rogue actors at e-commerce partner Shopify, 20,000 new customer records, including emails, names, postal addresses and phone numbers, along with what products were ordered, have been exposed. 

The Ledger hack

Ledger publicly revealed that customer information had been compromised in July 2020. At the time, the company estimated 9,500 customers had been affected by the hack. In the following months, CoinDesk documented a string of convincing phishing attempts executed by the hackers, including emails that mimicked official Ledger correspondence and text messages. 

Then, in December 2020, a data dump “exposed 1 million email addresses and 272,000 names, mailing addresses and phone numbers belonging to people who had ordered Ledger’s devices, which store the private keys for cryptocurrency wallets,” as CoinDesk reported.  The number of people affected was much higher than the original estimate of 9,500.  

A rash of SIM swaps were reported in the days following the data dump and some customers started getting extortion emails, including threats of violence. 

Related: Blockchain Bites: Bitcoin Trades Sideways as US Inflation Is Muted

In an interview last December, Ledger CEO Pascal Gauthier told CoinDesk the initial hack was, in part, a result of the company scaling so quickly, and that he and incoming CISO Matt Johnson would be announcing a new data policy and plan to further address the leaks in January.

Now, Ledger has released new information about the hack, revealing that it was likely due, in part, to rogue actors at Shopify, its e-commerce partner at the time. 

Shopify’s rogue agents

On Dec. 23, 2020, Ledger was notified by Shopify of an incident “involving merchant data in which rogue member(s) of their support team obtained customer transactional records, including Ledger’s. The agent(s) illegally exported customer transactional records in April and June 2020,” according to a blog post. 

Shopify told Ledger the data breach was part of its disclosure in September 2020, which involved over 200 merchants. Until Dec. 21, 2020, though, Shopify had not “discovered that Ledger was also targeted in this attack.” Shopify told Ledger it is continuing to investigate and that the issue had been reported to law enforcement. 

In conjunction with forensic firm Orange Cyberdefense, Ledger examined the 292,000 stolen data records. It found that while the database is quite similar to the personal information exposed in the previous attack, there were 20,000 new customer records compromised. 

The company said it notified customers who were affected on Jan. 13.

Ledger’s data security after the hack

First and foremost, in a blog post, Ledger reiterated the company will never ask customers for their 24 recovery words, which can be used to access bitcoin and crypto wallets. They also stressed that as long as customers had not shared these words, their Ledger hardware devices were secure. 

“We are announcing changes in the way Ledger will collect and handle customer data: keeping personal data for as short a time as legally possible, minimizing the display of personal data in emails, moving needed data in a further segregated environment as soon as possible, and creating a secure channel for communicating 1:1 with our customers via Ledger Live,” the authors, including new CISO Matt Johnson, wrote. 

First, Ledger is changing the way it stores data. In an interview, Johnson said that while he would prefer not to have to hold user data at all, the company is legally obligated to do so for a period of time. But Ledger is looking to go beyond what privacy is required by the European Union’s General Protection Data Regulation, according to Johnson. 

“By going beyond the GDPR, what we mean is not ‘holding data longer than GDPR requires’, but quite the opposite,” said Johnson. “Our goal is to delete data such as name, address, and phone number as soon as possible, even if we would be allowed to keep them under the GDPR. Some data, however, we will need to keep to fulfill our legal obligations such as accounting or tax requirements, and this data will be further segregated to limit its access.”

Delete, delete, delete

Moving forward, Ledger will delete data from its e-commerce partner as well as move customer data to a database that can’t be accessed from the internet as soon as your order is fulfilled, before deleting it as soon as they’re legally able. 

The company will also be deleting names, addresses and phone numbers from confirmation emails sent to customers so that this data is not passed through third-party e-commerce email providers. 

The email and social media will only be used for marketing messages and announcements, Ledger Live accounts are being set up to communicate technical and security information, seemingly to avoid instances of previous phishing scams, in which scammers encouraged Ledger users to download important security updates via genuine-looking emails.

Finally, Johnson will be doing a comprehensive review of third parties handling the data. 

“I will be going through and doing an examination of every single one of our third parties that we have to share or have the transmission of the data with as part of the supply chain,” said Johnson in a Zoom call. 

“We’ll be going through and looking at making sure that all of their processes are appropriate and rigorous, because if we’re entrusting our data to them, we need to be 100% sure that they are actually operating to the best of their capability to meet all of those minimal requirements, and preferably push them to go beyond that.”

A bitcoin bounty and law enforcement

Ledger is working with various law enforcement agencies as well as the blockchain analytics firm Chainalysis. It has even set up a bitcoin bounty for information related to those responsible for the hack. 

“We’re running down leads so we can actually be able to recover, if that’s at all possible, stolen funds if it’s landing on exchanges,” said Johnson. “We want to make sure information is all being obtained in a legal way and shared directly with law enforcement agencies. 

Johnson said Ledger wants to make sure all information gathering is done legally and “above board” with the goal of prosecuting the individuals responsible. 

The blog post qualified the bitcoin bounty, stating that the BTC will be disbursed at the discretion of Ledger and will take a variety of factors into consideration. In echoing Johnson’s comments, these include whether the information has been obtained legally, whether it’s new, how substantial it is and how far it would go toward furthering the investigation and successful prosecution. 

The company also hopes it can collaborate with other companies and individuals in the crypto industry to fund this bounty. It envisions a general purpose bounty fund, a sort of foundation to fight scamming and phishing attacks across the industry. 

“We are actively trying to do things to protect and improve that ecosystem,” said Johnson. 

Protecting your bitcoin even when recovery phrase is shared

The Ledger engineering team is also developing a product that “will protect the funds of a user even if they had shared their recovery seed with an attacker.”

Jerôme De Tychey, Global Head of Client Success at Ledger, said in an email the majority of the phishing attacks rely on making the Ledger Nano owners reveal their 24-word phrase. Scammers seize on that opportune moment of panic where the owners believe their funds to be at risk. Remembering crucial safety measures at that moment is not always possible, especially when the scammers pose as Ledger support staff. 

“We are acknowledging this problem and we will soon release a technical solution that will remove the 24 words as the single pillar of the security of our hardware wallets and will open the door to funds insurance as well,” said De Tychey in an email to CoinDesk

Moving ahead, how and when these changes are clarified and implemented will go a long way toward regaining users’ trust. But they represent a step forward for Ledger’s security in the aftermath of an extensive data breach, and just may work for the crypto community more generally. With bitcoin and other altcoins booming, the security around crypto tools and products is an iterative process. 

“There are always these new avenues that people attempt to exploit,” said Johnson. “So we have to do that continual reassessment and ask what else we can do to make this even more secure than what it is today. Ledger wallets haven’t been compromised, so they’re going after the human elements time and time and time again. So what else can we do? What else can we do to help protect the end customer? Because these are real people.”

Updated: Jan. 13, 202 16:14 UTC: The amount of the bitcoin bounty has been changed from 5 BTC to 10 BTC.

Updated: Jan. 13, 202 16:31 UTC: More information regarding the scope of the Shopify breach was added.

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Bitcoin snapped a four-day losing streak, appearing to stabilize around $34,000. After the recent market correction, prices for the cryptocurrency are still up 18% year to date, versus a 1.2% gain for the Standard & Poor’s 500 Index of large U.S. stocks.  

“Now is probably not the time to panic,” Matt Blom, head of sales and trading at the cryptocurrency exchange firm Diginex, wrote in a daily newsletter. 

In traditional markets, European shares fluctuated and U.S. stock futures were little changed as the U.S. House of Representatives on Wednesday prepared to vote on a second impeachment of President Donald Trump. Gold strengthened 0.1% to $1,855 an ounce. 

Market moves

Related: These DeFi Tokens Have Double-Digit Gains as Bitcoin’s Growth Tapers

As bitcoin and ether retreat from recent highs, the strong performance of other cryptocurrencies shows that traders and investors may now be turning to alternative tokens, often referred to as “altcoins,” for returns.

Bitcoin prices as of Jan. 11 stood at about 87% of their all-time high reached last week, and ether is about 78% of the way toward its all-time high from a few years ago, based on data compiled by CoinDesk Research. 

But other cryptocurrencies and digital assets, such as stellar (XLM) and litecoin (LTC), are still far from setting new records. One takeaway might be that they might have further to run, CoinDesk’s Muyao Shen reported Tuesday.

Altcoins are surging “in ways that we have not really seen since 2017,” Andrew Tu, an executive at quant firm Efficient Frontier, told Shen.

Related: Blockchain Bites: Bitcoin Trades Sideways as US Inflation Is Muted

It’s possible, of course, that some entry-level investors viewing bitcoin’s $34,000-ish price – what a small sport-utility vehicle costs – are unaware that the largest cryptocurrency can be bought in minute fractions, similar to the way that it’s possible to buy $100 or $1,000 of gold. 

Such confusion in the past has led some newbie investors to turn to altcoins, because their prices are often comparatively lower, sometimes counted in cents. 

David Derhy, an analyst at the trading platform eToro, wrote earlier this week that some traders might shift toward ether, the base cryptocurrency for the Ethereum blockchain.   

“Investors in bitcoin may be looking to take some profits and reallocate, and ether could be a target,” he wrote. “A target of $2,500 is reasonable given the gains we have already seen and current price momentum.” Such a level would represent a gain of nearly 150% from the current price. 

Simplex, a digital-asset platform, has been seeing “increasing demand for cryptos across the board,” though “retail investors seem to be looking for the next BTC,” CEO Nimrod Lehavi, wrote in a Google doc, sent by a spokesman via Zoom’s chat function.

“We are used to seeing BTC dominate around 90% of the total volumes of trade,” says Jonathan Leong, CEO of BTSE, another crypto platform. “But the recent week or so has seen a rise in our institutional clientele’s demand and interest in altcoins, with the balance being almost 50-50 at certain times.”

Bitpanda, an Austrian cryptocurrency platform, has seen bitcoin drop to between 30% and 40% of customer purchases this year, from 40% to 50% last year, according to a spokeswoman.  

“We have a big influx of users, and they are trading both bitcoin and altcoins,” the spokeswoman, Sara Moric, said in an email.

– Muyao Shen and Bradley Keoun 

Read More: Multiple Tokens See Rally Amid Looming ‘Alt Season’

Bitcoin watch

The near-term outlook for bitcoin has dimmed, analysts say, with some now seeing a possible extension of Monday’s major price drop.

“There could be another dump as outflows from the cryptocurrency exchange Coinbase Pro have dried up alongside an increased transfer of coins onto exchanges,” David Lifchitz, chief investment officer for Paris-based quantitative trading firm ExoAlpha, told CoinDesk.

Outflows from Coinbase Pro – considered a proxy for purchases of the cryptocurrency by big institutional investors, since the outflows are typically seen as transfers into cold storage for long-term holding – have receded sharply from the three-year high of 55,000 BTC  observed Jan. 2. 

The decrease could signal a weakening in institutional demand, which played a pivotal role in pushing bitcoin last week to a new all-time high above $41,000, from about $10,000 just a few months ago.

Meanwhile, exchange deposits have gathered pace, a sign that some investors may be looking to liquidate holdings and take profits. 

The number of coins held on exchanges increased by over 57,000 BTC on Tuesday, the biggest single-day change since March 2020, according to data from blockchain analytics firm Chainalysis. Exchanges have registered an average inflow of 103,000 BTC per day in the past seven days – higher than the 180-day average of 83,700 BTC.

Some analysts looking for clues in price-chart patterns are also calling for an extension of Monday’s drop. The Ichimoku cloud, a technical-analysis tool created by Japanese journalist Goichi Hosoda in the late 1960s, includes multiple lines that help identify support and resistance levels and other essential information such as trend direction and momentum.“

“I still see pressure on the downside in the short term,” said Patrick Heusser, head of trading at Swiss firm Crypto Finance AG, adding that $29,000 could be the make-or-break level. “Things could get ugly if that support is breached,” Heusser said. A price of $36,000 is the level to beat for the bulls. 

Chris Thomas, head of digital assets at Swissquote Bank, sees a period of price consolidation over the rest of this week, in the $33,000–$36,000 range.

– Omkar Godbole

Read More: Analysts Are Gloomy About Bitcoin’s Short-Term Price Outlook Right Now

What’s hot

European Central Bank’s Lagarde calls bitcoin “speculative asset,” hopes for digital euro in no more than five years (CoinDesk) 

“Could the OCC even grant a national bank charter to open-source software that manages deposit-taking, lending, or payments, if it doesn’t have officers or directors?” writes Acting U.S. Comptroller of the Currency Brian Brooks in an op-ed. “Not yet. Under current law, drawn up on the assumptions of the early 20th century, charters can only be issued to human beings” (Financial Times)  

When Goldman Sachs’ head of commodities research tries to value cryptocurrencies, he starts by imagining the sector doubling to $2T (CoinDesk) 

Bitcoin options volume on Deribit already 25% of 2020 total (CoinDesk) 

Bitcoin whales kept accumulating during Monday’s crash (CoinDesk) 

Coinbase apologizes for “recent customer experience issues” in U.K. and EU (Coinbase)

Tron is out, dai is back, in latest changes for CoinDesk 20 (CoinDesk Research) 

“For all the billions we have in DeFi right now, if you strip away the subsidies (paying for users), this number will collapse,” YearnFinance creator Andre Cronje writes in Medium post (Medium)  

CEX, lies and videotape: Binance accuses rivals of fighting dirty (CoinDesk) 

Winklevoss twins’ Gemini cryptocurrency exchange sees big jump over past year in bitcoin balances (Coin Metrics): 

Analogs The latest on the economy and traditional finance

Switzerland’s UBS to charge clients negative 0.75% interest rates on cash balances greater than 250K Swiss francs ($280K) (Reuters) 

Former U.S. CFTC Chair Gary Gensler said to be Biden’s pick for SEC chair (CoinDesk)

Brian Brooks, acting U.S. Comptroller of the Currency and former Coinbase general counsel, plans to step down in the next few days, Politico reports (CoinDesk). (SEE ALSO: Brooks op-ed featured above, in What’s Hot.)  

Zombie firms, or inefficient companies kept alive by cheap debt, could swell due to generous government lockdown-support programs, representing big risk for banks (WSJ)

World Bank Chief Economist Carmen Reinhart warns that household and business balance sheets might be overwhelmed by pandemic-related debt, potentially leading to a financial crisis (Bloomberg) 

Remote-working revolution to fundamentally alter the way managers operate (Reuters) 

Traders now watching bitcoin for clues about stock market’s direction (CNBC)

Federal Reserve Bank of Dallas’s Robert Kaplan hopes economy will be ready for conversation about tapering Fed’s $120 billion-a-month of asset purchases later this year (Bloomberg) 

ICYMI: “Central banks show no inclination of moderating their huge stimulus,” Allianz’s Mohamed El-Erian writes in op-ed (Bloomberg Opinion) 

The U.S. Federal Reserve is focusing on the positive medium-term prospects for jobs based on the success of a coronavirus vaccine (Reuters)

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Coinbase issued a rare apology Tuesday to UK and EU customers who the major cryptocurrency exchange said in a blog post have been affected by weeks of systems outages and trading restrictions.

• Coinbase blamed the problems on months of heavy customer trading activity from platform newcomers and returning accounts.
• “Evolving regulatory requirements” also led to Coinbase placing temporary restrictions on accounts for which it needed to collect more information.
• Coinbase in the post refused to give ground on its regulatory obligations but said it “can do a better job in communicating” those burdens to customers.
• The company said it is streamlining its information collection procedures to help salve regulatory lockouts.
• Coinbase did not address, nor apologize for, its global troubles in keeping all operations running smoothly through heavy trading days.

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Visa called off its $5.3 billion acquisition of Plaid, the fintech firm serving as a fiat bridge for a number of crypto and decentralized finance (DeFi) applications.

• The U.S. Department of Justice (DOJ) announced Tuesday that the two companies have officially called off their planned merger in the wake of the DOJ’s lawsuit last year that sought to block the deal.
• The DOJ filed a civil antitrust suit on Nov. 5, 2020, to stop the merger, claiming Visa is a monopolist in online debit, charging both consumers and merchants billions of dollars in fees each year to process online payments. 
• “Now that Visa has abandoned its anticompetitive merger, Plaid and other future fintech innovators are free to develop potential alternatives to Visa’s online debit services,” Assistant Attorney General Makan Delrahim said in a statement. “With more competition, consumers can expect lower prices and better services.”
• As CoinDesk previously reported, Plaid has worked with Coinbase and at least two DeFi startups.
• The DOJ reported that Plaid earned approximately $100 million in revenue in 2019.

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As prices for bitcoin and ether retreat from their recent highs, the strong performance of other cryptocurrencies indicate traders and investors may now be turning to alternative coins (altcoins) for potential high returns.

Data compiled by CoinDesk Research shows that as of Jan. 11, prices for both bitcoin and ether were about 87% and 78%, respectively, of their all-time highs. Yet, other CoinDesk 20 assets were still far from their highest prices on record. One possible implication is that these tokens may still have potentials to reach higher price levels amid the latest bitcoin’s bull run.

“We have seen [altcoins] pump – both before and after [Monday’s] correction – in ways that we have not really seen since 2017,” Andrew Tu, an executive at quant firm Efficient Frontier, said.

Related: Market Wrap: Bitcoin Hovers Around $34.2K While Options Traders Pay Up for Possible ETH Upside

Bitcoin’s market capitalization hit a new record high on Jan. 8 but has dropped since then, evidence that some traders may be taking some profits from bitcoin and plowing them into altcoins, according to Tu.

As CoinDesk reported previously, following the institution-driven 2020 bitcoin bull run, retail investors and traders have joined the rally for “fear of missing out.” Some entry-level investors viewing the high-numbered trading price of bitcoin – unaware that it can be bought in minute fractions – take to altcoins because their relatively low price make them appear affordable

One example appears to be the recent double-digit gains in XRP. A seemingly inexplicable rally happened shortly after its price crashed on the news the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Inc., claiming the company sold the token as a security.

Tu said tokens that in the popular decentralized finance sub-sector of the crypto space have logged particularly strong performance.

Related: CEX, Lies and Videotape: Binance Accuses Rivals of Fighting Dirty

Prices for synthetix (SNX), a token for a decentralized trading platform for minting and exchanging synthetic tokens mirroring the price of other assets, logged a new all-time high on Tuesday at around $16.01. As of press time,it traded at $14,78, up 28.54% over 24 hours, according to data from Messari.

Read More: First Mover: As Bitcoin Rally Pauses, DeFi Keeps Astounding

Other major DeFi tokens demonstrated robust growths include Maker (MKR), Compound (COMP), Aave (AAVE), and Uniswap (UNI), Messari’s DeFi assets tracker shows.

Read More: Maker’s MKR Token Surges to 2-Year High on DeFi Growth

But in Arcane Research’s latest weekly market report on Jan. 12, the Norwegian crypto research firm warned the risk of such “altcoins bets.”

“It’s safe to say that the rally in bitcoin has reached altcoins, as altcoins saw extreme returns throughout last week,” the report read. “However, as bitcoin headed downwards on Sunday and Monday, altcoins followed with more fury, confirming that altcoin movements are based on a risk-on approach.”

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After a record day in spot volume, bitcoin’s price went up, down and back up. Meanwhile, most ether options traders are bearish, some are paying up in case it gets close to record highs.

• Bitcoin (BTC) trading around $34,278 as of 21:00 UTC (4 p.m. ET). Gaining 3% over the previous 24 hours.
• Bitcoin’s 24-hour range: $32,528-$36,605 (CoinDesk 20)
• BTC below the 10-hour and 50-hour moving averages on the hourly chart, a bearish signal for market technicians.

Bitcoin’s price had an up-and-down day, going as high as $36,605 at around 08:00 UTC (3 a.m. ET), falling to $32,528 at around 14:30 UTC (9 a.m. ET) and then going back up to $34,278 as of press time. 

Andrew Tu, an executive for quant trading firm Efficient Frontier, sees the $36,000 price level as “resistance,” an area where bearish traders seem primed to hit the sell button on bitcoin. “Right now bulls are challenging the $36,000 resistance. It failed to get past $36,600 earlier during the afternoon Asia hours,” Tu told CoinDesk. “When the U.S. East Coast woke up, the market started bidding the price upwards again.”

Related: Multiple Tokens See Rally Amid Looming ‘Alt Season’

Monday’s bitcoin spot volumes were the highest ever seen since CoinDesk 20 data on eight major spot exchanges began being recorded. An astounding $13.3 billion in volume was traded Monday, the highest since Dec. 22, 2017, when volumes hit $9.7 billion.

Yet, spot volumes were much lower Tuesday, at $5.1 billion as of press time.

“There will likely be a battle to bring this past that $36,000-$36,600 range,” said Efficient Frontier’s Andrew Tu. 

Volume will likely play a factor in that battle given the blockbuster spot exchange activity at the week’s open. However, that was due to large amounts of selling, which caused the world’s oldest cryptocurrency to dump 20% within 24 hours. 

Related: CEX, Lies and Videotape: Binance Accuses Rivals of Fighting Dirty

Read More: Bitcoin Whales Kept Accumulating During Monday’s Crash

“Bitcoin peaked at $42,000 immediately before a weekend,” said David Russell, vice president of market intelligence at trading technology firm TradeStation. “Volume dries up when institutional investors are away and other markets are closed. That left bitcoin hanging out in the middle of thin air, with no buyers to support it.”

In the bitcoin options market, traders seem to like their chances of a $30,000 price per 1 BTC at Jan. 21 expiration. The probabilities based on the market have a 62% chance of bitcoin over $30,000 by that date, a 55% chance of $32,000 and a 47% expect the world’s oldest cryptocurrency to be $34,000 closer to the end of the month. 

“Bitcoin is a volatile asset,” said TradeStation’s Russell. “You cannot expect anything to double in a few weeks and not pull back.”

Read More: As Bitcoin Regains, Options Traders Bet on $52K Move by Late January

Michael Gord, chief executive officer of trading firm Global Digital Asset, said he expects institutions to continue scooping up bitcoin, which might help support the asset at a $30,000 price point and above. “I think we’re going to see a huge resurgence as big brands start to collateralize their treasury on the blockchain.” he said.

Bets are being placed on potential ether FOMO

Ether (ETH), the second-largest cryptocurrency by market capitalization, was up Tuesday, trading around $1,085 and climbing 6% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

On Monday, the amount of premium traded on Deribit’s ether options market heavily favored calls, which give owners the right, but not not the obligation, to buy an asset at a particular price. Ether’s all-time spot price high sits at $1,448, according to CoinDesk 20 data.

While the ether options market heavily favors strikes below the $800 spot ETH price point, 68% of call premiums paid Monday are apparently from traders looking to hedge out any risk of another parabolic rise in ether, according to data aggregator Genesis Volatility’s Tuesday investor note. 

“Option traders are willing to pay up much more for ETH upside option exposure than they are for downside exposure,” Genesis wrote. “This activity indicates traders see an asymmetry in price action volatility, also known as ‘crash up risk’ and FOMO sentiment.”

Other markets

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

• stellar (XLM) + 19.2%
• cardano (ADA) + 11%
• kyber network (KNC) + 8.7%

Equities:

• Asia’s Nikkei 225 ended the day flat, in the green 0.10% as a drug made by Japan’s Chugai Pharmaceutical jumped 6% on positive coronavirus trial results.
• In Europe the FTSE 100 closed lower by 0.65% as traders contended with pessimism over coronavirus cases and U.S. political turmoil.
• The S&P 500 in the U.S. was flat, at 0.04% as rising interest rates, and the potential negative impact they may have on corporate revenues, left investors with mixed sentiment.

Read More: UK Treasury Calls for Feedback to Cryptocurrency, Stablecoin Regulation 

Commodities:

• Oil was up 1.8%. Price per barrel of West Texas Intermediate crude: $53.14.
• Gold was in the green 0.73% and at $1,856 as of press time.

Treasurys:

• The 10-year U.S. Treasury bond yield fell Tuesday dipping to 1.134 and in the red 1.3%.

Related Stories

• First Mover: Market Signs Look Healthy as Bitcoin Sell-Off Subsides
• As Bitcoin Regains Lost Ground, Options Traders Bet on $52K Move by Late January

While many U.S. crypto exchanges are using the latest bull run to spruce themselves up in hopes of impressing institutional investors and regulators, China’s so-called “Big Three” centralized crypto exchanges (CEX) – Binance, Huobi and OKEx – are slinging mud at each other. 

The latest flap is over a bogus video that purports to show a single sell order of 21 million bitcoin on Binance on Jan. 4. The clip went viral last week on WeChat, a popular China-based social media platform.

The video, viewed by CoinDesk, claims that bitcoin’s price took a hit after the order was completed. Screenshots in a WeChat group’s chats show that some users appear to be furious, accusing Binance of “market manipulation.”

Related: Multiple Tokens See Rally Amid Looming ‘Alt Season’

The angry reactions ignored the fact that the 21 million number alludes to the total amount of bitcoin that will ever be mined, sometime by the year 2140 (bitcoin’s total supply currently stands at 18.6 million). So clearly 21 million bitcoin could not have been sold. Besides, most major exchanges’ bitcoin reserve data are available to trace.

But because we’re nothing if not thorough, CoinDesk confirmed with several on-chain data firms, including CipherTrace and CryptoQuant, that no orders of that size were placed on Binance at the time the video purports to show. 

A Binance executive spoke out about the video on WeChat, throwing shade at unnamed “competitors” he claimed were behind the video.

The video “could not be more fake,” Yi He, co-founder and chief marketing officer of Binance, wrote in Chinese on WeChat. “I was not going to respond because I thought nobody was going to believe it, but considering how ‘hard-working’ our competitors were to post it on every group chat, I just wanted to express my appreciation.”

Related: Market Wrap: Bitcoin Hovers Around $34.2K While Options Traders Pay Up for Possible ETH Upside

As of press time, Binance did not respond to CoinDesk’s requests for comment.

If you looked at English-language social media platforms, you would think the three China-originated centralized crypto exchanges coexist in peace and harmony. But a survey of Chinese-language platforms reveal a differing dynamic. Screenshots of chats and public posts on WeChat and other popular Chinese social media platforms such as Weibo show multiple disputes among the three exchanges over the past several years. This is not the first time Binance’s He has confronted executives from rivals OKEx and Huobi on social media.  

He’s accusations notwithstanding, both Huobi and OKEx denied responsibility for the latest incident. Ciara Sun, vice president of global business at Huobi Group, denied Huobi was involved in “the creation of the video,” and told CoinDesk the video “falsely” recorded a sell order on Binance’s platform.

“As a global financial organization that adheres to both ethical and regulatory standards, we value honesty and transparency within our organization and do not rely on misleading marketing tactics that would erode the trust of our community,” Sun said.

Likewise, OKEx CEO Jay Hao told CoinDesk that crypto exchanges are often the victims of false accusations of “price manipulation.”

“Anyone with knowledge of this industry would immediately be able to dismiss a photo like this, but it’s unfortunate that some investors still suffer from these types of groundless and fictitious accusations,” Hao said.

It’s not just business, it’s personal

Normal business competition, centered on capturing market share in China, is only one part of the tensions involving the three exchanges. These hard feelings go back at least four years, when OKCoin’s then-CTO, Changpeng Zhao, and co-founder Yi He left what was at the time the largest Chinese crypto-to-fiat exchange to start Binance, according to Colin Wu, a China-based crypto writer who previously worked in the country’s crypto mining industry.

Meanwhile, OKCoin, along with other China-based bitcoin trading platforms, closed their trading operations in the country and moved offshore after Chinese regulators banned initial coin offerings in late 2017. OKEx has worked as a separate entity from its parent company OK Group or OKCoin since 2017, a spokesperson told CoinDesk previously. OKCoin now is a San Francisco-based crypto exchange, led by Chief Executive Hong Fang.

Huobi joined the fray slightly later and friction among the three exchanges really intensified after each launched crypto derivatives products. OKEx currently is the second-biggest derivatives exchange by bitcoin open interest, followed by Binance and Huobi. (The CME is the largest thanks to growing interest from institutional investors in the U.S.)

Several sources, who agreed to speak on the subject anonymously due to close business relationships with the three exchanges, told CoinDesk that as the competition heats up again there may be an uptick in tricks and false information such as the fake Binance video. In turn it can cause a lot of “fear, uncertainty and doubt” (FUD) among retail traders and investors in China, especially those who are relatively new to the market.

“The video came out at a time when retail sentiment was at the peak,” one source said. “When people are scared of the top, they could be easily aroused by anything like this.”

“No matter how much the cryptocurrency space has matured, there will always be interested parties from without who leap at the chance to cause FUD amongst traders,” OKEx’s Hao said.

Related Stories

• Is China Poised to Nationalize Alibaba?
• First Mover: Market Signs Look Healthy as Bitcoin Sell-Off Subsides

Gary Gensler, a Washington and Wall Street veteran who has closely studied the cryptocurrency field, is expected to be named chairman of the U.S. Securities and Exchange Commission (SEC) in the next several days by President-elect Joe Biden, two sources familiar with the matter told Reuters on Wednesday.

• A former chairman of the Commodity Futures Trading Commission (CFTC), Gensler served as a key financial regulator for former President Barack Obama, spearheading new derivatives rules after the 2008 financial crisis. He also served in the Treasury Department during the Clinton administration. 
• More recently, he has also testified before Congress about cryptocurrency and blockchain on multiple occasions, pushing back against comparisons between cryptocurrencies and Ponzi schemes and declaring that the still-unlaunched libra token met the requirements of being a security under U.S. law. 
• At MIT’s Sloan School, Gensler taught a course on cryptocurrencies and blockchains, calling the technology “a catalyst for change in the world of finance and the broader economy.”

The story is developing and will be updated.

READ Gary Gensler’s 2019 CoinDesk op-ed on crypto/blockchain as a “change catalyst.“

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The acting head of the U.S. federal banking regulator is reportedly stepping down this week.

Brian Brooks, who is currently leading the U.S. Office of the Comptroller of the Currency (OCC), will leave the federal agency within the next few days, Politico’s Victoria Guida reported Tuesday.

Brooks was named Acting Comptroller last summer after first joining the agency in March. He was nominated to serve a full term by President Donald Trump. However, with Trump’s loss in the November presidential election and the Democratic Party retaking the Senate earlier this month thanks to the results of the runoff election in the state of Georgia, it appears more likely President-elect Joe Biden will nominate his own choice to run the agency.

Related: How the OCC Is Building Crypto America (and Saving Banks From Extinction)

In an email, OCC Deputy Comptroller for Public Affairs Bryan Hubbard “refused to confirm such rumors.”

Brooks, the former general counsel at Coinbase, has had a major impact on the OCC’s crypto approach during his brief tenure. During his term, the OCC published several interpretive letters or made statements announcing that banks can provide services to issuers of stablecoins, partner with crypto custodians, conduct payments using stablecoins and operate nodes on blockchain networks. 

Possibly his most far-reaching impact came from his push for fintech startups – like crypto companies – to secure national banking charters, allowing them to operate throughout the country without needing to apply for each state’s money transmitters license. 

To date, BitPay, Paxos and Anchorage have filed for these charters.

Related: Crypto Long & Short: Traditional and Crypto Markets Are Starting to Converge

However, the crypto-friendly regulator drew backlash from members of Congress, six of whom wrote an open letter after the election asking Brooks to focus on economic relief during the COVID-19 pandemic rather than crypto regulations. 

Read more: ‘Inherently Borderless’: Acting OCC Chief Talks Crypto, State Licenses and DeFi

Rep. Maxine Waters, the chair of the Financial Services Committee, went a step further, asking Biden to rescind all of the OCC’s crypto-related guidance as part of a broader effort to revoke the rules implemented under Trump’s tenure. 

Brooks has been an advocate for a digital dollar and the crypto space more broadly, and likened decentralized finance (DeFi) to self-driving cars in an opinion piece in the Financial Times Tuesday morning. 

These “self-driving banks,” as Brooks put it, could create money market interest rates algorithmically, replacing human committees, and could enable broker-less trades. They could also increase liquidity risks or create asset volatility. 

He advocated for a national regulatory approach rather than a patchwork, state-by-state approach, though he noted Congress might have to update legislation to fully allow for the OCC to oversee this sector’s growth.

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The U.S. Securities and Exchange Commission’s Acting Enforcement Director Marc Berger will leave the agency this month, the SEC said Tuesday.

• Berger assumed SEC’s top investigative post after former Director Stephanie Avakian’s departure at the end of 2020. He had been moving up the agency ranks since December 2017.
• SEC said Berger presided over the agency’s prosecution of the Telegram initial coin offering and its initiation of the unregistered securities suit against Ripple Labs.
• Enforcement staff pursued “meaningful relief” for victims of cryptocurrency fraud during Berger’s tenure, SEC said.

Related Stories

• Gensler Said to Be Named SEC Chairman: Reuters
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• Ripple ‘Tried’ to Settle With SEC Ahead of XRP Suit, CEO Says

Bitcoin’s price is bouncing back, having found a floor of around $30,000 to stand on. Meanwhile, the number of active bitcoin addresses and transaction volumes has climbed above peaks set in 2017.

Also, content moderation decisions from Amazon, Shopify and Twitter following the Capitol riots in Washington, D.C., on Jan. 6 have put efforts to “decentralize” the web into sharp relief.

Few, if any, crypto-based protocols or platforms have matured to that level, though there are encouraging signs. Yesterday, Sci-Hub moved to the “uncensorable” Handshake network, preserving its rich database of pirated academic research.

Top shelf

Related: First Mover: Market Signs Look Healthy as Bitcoin Sell-Off Subsides

Activity peaks
There were over 1.3 million active bitcoin addresses in a single day last week, the most since the crypto bull run of 2017. Similarly, trading volumes are treading new ground – largely driven by retail interest, analysts say – above peaks set three years ago. Bitcoin OGs weighed in on “how far we’ve come” between the two bitcoin rallies.

Uncensorable web
Sci-Hub has launched on the uncensorable Handshake network. A database of pirated academic research, SciHub has long faced domain name revocations and attempts to wipe it from the web – but now Handshake’s alternative, distributed domain name architecture will help keep it alive. The fight to decentralize the internet’s basic protocols was thrown into relief by Twitter, Amazon and Facebook’s heightened and unprecedented content moderation decisions in the week following the Capitol riots.

Bitcoin APIs
Digital asset manager NYDIG is joining forces with banking technology provider Moven to offer plugins for banks that want to launch bitcoin products. The move comes in the wake of several letters from the U.S. Office of the Comptroller of the Currency giving banks the green light to custody crypto and the ability to conduct payments and other activities with stablecoins.

Quick bites

• FIVEFOLD INCREASE? Bakkt, soon to go public, predicts the crypto industry will grow into a $3 trillion market by 2025, according to its investor deck. (CoinDesk)
• SEC COMPLIANT: Digital avatar and social networking platform IMVU launched its VCOIN digital token Tuesday. (CoinDesk)
• MUTUAL COVER: Ethereum-based Nexus Mutual expands its decentralized “insurance” to centralized exchanges. (CoinDesk)
• SMALL BUYS: Here’s one way institutions like to hide their multimillion-dollar bitcoin buys. (CoinDesk)
• LOST KEYS: Lost Passwords Lock Millionaires Out of Their Bitcoin Fortunes (NYT)
• GOVERNANCE DISPUTES: Aragon One CEO Jorge Izquierdo resigned in protest of decisions made in his absence. (CoinDesk)
• RALLY RELIEF? Here’s Why Coinbase Keeps Going Down During Bitcoin Rallies. (Decrypt)
• NOT BUYING: South Korean gaming giant Nexon denies reports that it plans to acquire Bithumb. (The Block)

Market intel

Retracing and beyond?
Bitcoin options traders are placing bids for a $52,000, $64,000, and $72,000 BTC strike price, indicating that despite a 20% dip to $30,305 on Monday, the bulls are still roaming. Bitcoin is around $34,000 at press time, well shy of weekend highs above $40,000.

At stake

Related: Blockchain Bites: Crypto Market Cap Drops Below $1T as Dollar Gains

Hashrate distribution
A frequent criticism of the Bitcoin ecosystem is the centralization of hash power contributed to secure the network. For years, the mining market has coalesced in China due to an abundance of cheap electricity, the proximately of mining machine giants and low production costs.

According to the Cambridge Bitcoin Electricity Consumption Index, China dominates the mining sector, accounting for nearly two-thirds of contributed hash power. The U.S. comes second with approximately 7% of the global hashrate, followed closely by Russia and Kazakhstan. It’s worth noting these metrics are based on a limited sample size.

Further, only 10 mining pools are responsible for 70% of bitcoin’s hash power, Casa CTO Jameson Lopp noted in a blog post this summer.

Detractors point to this concentration – at the national and corporate level – as a fault line for Bitcoin security. If malicious actors gained control of the network, they could perpetrate a 51% attack, which is a way to double-spend bitcoin or otherwise tamper with the blockchain’s record of transactions.

“In 2020, Bitcoin has […] become a highly centralized system that places an increasing amount of trust in a small number of large entities. Any centralization of Bitcoin network hash power should be of concern as it erodes the trustless model of the network,” TokenAnalyst, a cryptocurrency research firm, claimed last year.

While Lopp is seemingly in support of distributing power away from mining pools, he doesn’t see this concentration as a three-alarm fire. Hasu, a pseudonymous crypto researcher, also thinks concentration is harmless.

“[B]itcoin’s design doesn’t assume mining power is widely distributed. It’s simply not a requirement. Instead, it only assumes miners are rational, which is something completely different. Rationality means agents do what is best for them, even if that means colluding with other miners to attack the system,” he wrote in a CoinDesk op-ed.

Research has shown the costs of attacking a well-secured blockchain network would likely surpass the gains made. Further, in practice, a double-spend is not a death sentence. Ethereum Classic, a less-active fork of Ethereum, suffered three double-spend attacks in 2020 and is still chugging along in the new year, after a number of security updates.

Even if not a pressing threat, there is still a cause to decentralize bitcoin’s computing power. Nangeng “NG” Zhang, CEO of mining giant Canaan, noted there’s a growing trend chipping into China’s dominance.

“[B]itcoin miners have traditionally relied on the cheap electricity powered by hydroelectric plants in the Sichuan province as their source of renewable energy. But when you consider that hydropower is only available during the wet season in China, six months of the year, it’s no surprise that bitcoin miners have cast their eyes to more innovative and sustainable sources of energy across novel jurisdictions,” he wrote in a CoinDesk op-ed.

Several firms, including Layer1 and Northern Data, have set up shop in Texas, attempting to leverage the state’s abundant supply of cheap electricity and business-friendly environment. Layer1 even announced the audacious goal of usurping some 25% of the bitcoin hashrate in the coming years, though the company has had some notable blowbacks.

Now, Kentucky looks set to become the next center of U.S. crypto mining. A pair of lawmakers introduced legislation offering tax breaks to cryptocurrency miners.

As Zhang concludes: “In reimagining a mining ecosystem that is both sustainable and viable, we will do well to plan strategically for the long term and not only consider short-term wins – whether it’s in tech or profitability – focusing instead on the complete integration of commercial, sustainability and environmental goals.”

Who won #CryptoTwitter? Related Stories

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Deribit traders have already recorded 25% of last year’s entire bitcoin options volume.

• After a record-setting $2 billion traded Monday, total volume for bitcoin options on Deribit in the past two weeks reached $14.5 billion Tuesday morning.
• In 2020, all bitcoin options trading on Deribit totaled just less than $57 billion.
• Contributing to its wild growth in the past month, the Panama-based exchange now offers traders sky-high bets of bitcoin reaching $100,000, $200,000 or even $300,000 by December.
• At the end of December 2020, Deribit investor and Three Arrows Capital CEO Su Zu predicted that in 2021, “Options markets volume to become over 50% of all crypto derivatives markets.” Perpetual cryptocurrency futures markets reported over $190 billion in the past 24 hours, according to CoinGecko.
• Concurrent with soaring volume, bitcoin’s implied volatility is surging, according to data from Skew. The one-month gauge currently above 135%, its highest level since March 2020 just after bitcoin’s crash below $4,000.

• Ether options, although a significantly smaller market, are experiencing similar growth with a record $264 million traded on Jan. 4, per data from Skew, a more than 2,700% increase from three months ago.
• Deribit routinely accounts for over 85% of daily options volume, per Skew data, with OKEx typically the second-largest bitcoin options market representing around 5% of daily volume.
• Outside of derivatives markets, all cryptocurrency trading volumes across the board are soaring, with spot markets reaching record levels, even passing 2017’s peak, per CoinDesk Research.

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Fidelity Investments’ international subsidiary has increased its investment BC Technology Group Ltd, the operator of Hong Kong’s first licensed cryptocurrency exchange OSL.

• Regulatory filings indicate Fidelity International (FIL Limited) purchased 3.3 million shares of BC Group for HK$52.3 million (US$6.7 million) on Jan. 6, bringing its ownership stake to 6.29%.
• Fidelity previously held 5.29% of BC Group, having put $14 million in the Hong Kong crypto exchange operator early last year.
• BC Group raised HKD697 million (approximately US$90 million) last week through a top-up share placement.

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The U.K. Treasury has released a consultation paper to gather feedback from stakeholders concerning the government’s regulatory approach to cryptocurrencies and stablecoins.

The consultation solicits opinions on how the U.K. can make sure its regulatory framework is “equipped to harness the benefits of new technologies, supporting innovation and competition, while mitigating risks to consumers and stability,” and incorporates advice from the Cryptoassets Task Force.

With a large proportion of crypto assets falling outside regulatory oversight, the Treasury says they may pose a risk to consumers and lack financial safeguards.

Related: Coinbase Apologizes to UK and EU Customers Hit by Regulatory Lockouts

The U.K. is planning a “a staged and proportionate approach” to new crypto asset developments, taking a focus in the paper on stablecoins – cryptocurrencies that generally aim to have a stable value by being backed by assets such as the U.S. dollar.

“[T]he landscape is changing rapidly. So-called stablecoins could pave the way for faster, cheaper payments, making it easier for people to pay for things or store their money. There is also increasing evidence that [distributed ledger technology] could have significant benefits for capital markets, potentially fundamentally changing the way they operate,” said John Glen, M.P., the Treasury’s economic secretary, said in the paper’s introduction.

However, he said, such developments could “pose a range of risks to consumers and, depending on their uptake, to the stability of the financial system.”

The consultation focuses particularly on developing a “sound regulatory environment” for stablecoins, which the U.K. government considers have most “urgent” risks and opportunities.

Related: New Zealand’s Financial Watchdog Warns on Crypto Investment Risks

Since the announcement of the Facebook-backed libra project (now rebranded as diem), regulators and governments worldwide have raised concerns over the potential effects of so-called global stablecoins on financial stability and even monetary sovereignty.

The U.K.’s Financial Conduct Authority has already issued guidance on crypto assets – including “exchange tokens” like bitcoin, ether and XRP – setting out which do and don’t fall under its jurisdiction in July 2019.

This new consultation will focus on the roles of crypto assets and stablecoins in payments and investment, as well as the use of blockchain or distributed ledger technology in financial markets. It will also look at additional regulatory actions that might be required in the space.

Read more: UK’s FCA Warns Investors of High-Risk Crypto Investments and Scams

The paper marks the second Treasury-led crypto consultation. The first, announced last summer and concluded in October, set out plans to increase oversight into cryptocurrency promotions in order to protect investors. The results will be published “in due course,” the Treasury said in the new paper.

The FCA recently banned the sale of derivatives and exchange-traded notes, saying it considers the products to be ill-suited for retail consumers due to the potential harm they pose.

Responses to the consultation paper are being accepted until March 21.

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Digital asset custodian Anchorage has nabbed a trade operations veteran from Celsius Network to manage the risks facing its $4 billion crypto vault.

The new hire, Asaf Iram, said he will “connect the dots” among Anchorage’s financing, lending, custody and staking businesses as the leadership team’s first “Head of Risk.” He told CoinDesk his focus will be on ensuring Anchorage’s customers feel safe about their assets, explaining to them the risks of deploying those assets across different lending pools, be they conservative, moderate or aggressive, Iram said.

Iram previously spent 18 months managing the trade desk for crypto lender Celsius Network. He came to that role after nearly three years in the arbitrage trenches as a full-time crypto trader. It was a passion project that Iram said inspired him to quit the Tel Aviv Stock exchange in 2017.

Related: Crypto Custodian Anchorage Gets SOC 1 Security Certification With Big 4 Auditor EY

There, he said, he was also a financial risk manager. Iram said he helped his company, DAR Finance, navigate risk across different traders. Iram also served stints as a high frequency trader.

Anchorage acquired data analysis firm Merkle Data early last year, saying at the time it would boost the firm’s risk modeling capabilities. In May company executives pledged new products built on those capabilities were in the works.

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Bitcoin (BTC) was down for a fourth straight day, though changing hands well above Monday’s low around $30,000. After soaring to a new all-time high around $40,000 last week, prices have tumbled about 13% since Saturday, the most for a three-day stretch since March 2020, according to TradingView. 

“Volatility is the price you pay for performance,” as the investing-legend-turned-bitcoin-bull Bill Miller put it last week to CNBC.

In traditional markets, Asian shares rose on Tuesday and European indexes were little changed. U.S. stock futures pointed to a higher open. The possibility of further economic stimulus and turbulent U.S. politics helped push yields on 10-year U.S. Treasury notes to 1.16%, the highest since March,  according to CNBC. 

Related: Multiple Tokens See Rally Amid Looming ‘Alt Season’

According to Bloomberg News, that political situation could entail the U.S. House of Representatives impeaching President Donald Trump with fewer than 10 days to go in his presidency because Vice President Mike Pence appears unlikely to invoke constitutional authority to remove the president from office.  

Gold strengthened 0.9% to $1,861 an ounce. 

Market moves

A high price does not a market make. But guess what does? High trading volume. 

One of the important things to note about the bitcoin market during this year’s rally is the record amount of cryptocurrency changing hands. That was true of the rapid ascent to new all-time highs above $40,000, and it’s also been true on the way down. 

Related: Market Wrap: Bitcoin Hovers Around $34.2K While Options Traders Pay Up for Possible ETH Upside

What it means is the market is staying liquid, seen as a healthy attribute especially when prices are on the move. You might be a buyer at what might seem like nosebleed levels, but you’re not the only one.

As reported Monday by CoinDesk’s Muyao Shen, trading volumes and active addresses for bitcoin have now surpassed their previous all-time highs during the last crypto bull run of 2017.  

“This is first and foremost a sign of how much bigger and mature the industry is, with a lot more money flowing on these exchanges,” Bendik Norheim Schei, head of research at the Norwegian cryptocurrency analysis firm Arcane Research, told CoinDesk. “It is great to see higher volumes, making the market more liquid and efficient.”

The surging volume due to Monday’s sell-off came in part from newcomers to the market, according to Schei.

“Some of this volume is definitely from new and unexperienced investors entering the market for the first time and panicking when the price starts falling,” he told Shen. “These corrections are necessary and healthy, even in a bull market.”

And those newcomers aren’t necessarily rubes. They might even be sophisticated Wall Street players who have only recently dipped their toes into crypto – a sign of bitcoin’s increasing adoption by big institutional investors as a way of betting on the currency debasement amid trillions of dollars of central bank money printing. 

“The retail-driven spot market, which was pretty much the entire market three years ago, is now part of a much more mature and diverse marketplace that includes derivatives, investment funds and other institutional involvement.” Sui Chung, chief executive of CF Benchmarks, told CoinDesk. 

(For what it’s worth, healthy liquidity is considered such a crucial component of any market that last year the Federal Reserve cited “smooth” functioning of Wall Street’s plumbing as a rationale for continuing its $120 billion monthly bond purchases, a form of monetary stimulus that was previously considered an emergency measure but is increasingly seen as normal.) 

Alongside the flurry of activity on cryptocurrency exchanges, there has also been robust traffic in bitcoin derivatives – financial contracts such as futures, options and “perpetual swaps” traders can use to bet on the cryptocurrency’s price. 

The Chicago-based CME said Monday its notional bitcoin futures volume climbed to a monthly record of $30 billion in December, exceeding the then-record $20 billion traded in November. The exchange launched its bitcoin futures contract in January 2018. 

At least one industry executive says futures markets might become more critical as more investors hoard their cryptocurrency holdings while waiting for prices to go up.  

“With ‘physical’ bitcoin disappearing, the volumes of derivative contracts are soaring,” said Richard Byworth, CEO of the cryptocurrency exchange firm Diginex, which last week launched its own “bitcoin perpetual futures contract.”

There’s high risk, too: The market was apparently liquid enough that some $410 million of long positions in bitcoin futures (bets on further price gains) were wiped out Monday after margin calls on the Binance exchange, according to the data firm Glassnode in a tweet. 

All of this just makes it more likely that the bitcoin market is reflecting the wealth of opinions on where prices should be at any given time for a blockchain-based, 12-year-old, peer-to-peer electronic payment system with a fixed issuance schedule that is now seen as a hedge against potential debasement of the U.S. dollar.     

Simon Peters, of the trading platform, eToro, wrote Monday that “we can look to the $70,000-$90,000 range as a price target for the end of 2021.” Henrik Kugelberg, an over-the-counter bitcoin trader, told CoinDesk’s Daniel Cawrey the latest sell-off might be “just be a bump in the massive bull run – $100,000 this year is totally possible!” 

Denis Vinokourov, head of research at the London-based prime brokerage Bequant, says there’s a “good deal of open options interest at the $52,000 price level.” 

With trading volumes growing, it’s getting easier to place those bets, whether right or wrong.

– Bradley Keoun    

Read More: Bitcoin’s Active Addresses, Trading Volumes Now at All-Time Highs

Bitcoin Watch

Despite bitcoin’s 20% crash on Monday, some options traders are betting on a continued price rally in coming weeks.

Some 4,000 call option contracts have been bought at the $52,000 strike in the past 24 hours, according to data from the Swiss-based data analytics platform Laevitas. The $64,000 and $72,000 strike call options show buying volume of 3,250 and 2,000, respectively.

The call options carry an expiration date of Jan. 29, so they represent a gamble that bitcoin could prices could rise above that level in the next few weeks. 

These deep out-of-the-money trades are relatively cheap and tend to gain significant value if the price rally materializes, yielding big returns on small investments. As such, seasoned traders with bullish price expectations often buy call options at higher strike prices, on the chance that they might pay out. So the fact that traders are actually using them could indicate bullish market sentiment. 

In another indicator from the options market, the one-, three- and six-month put-call “skews,” which measure the cost of puts relative to calls, remain entrenched in the negative territory. That’s a sign of call options, or bullish bets, drawing higher demand than puts, which are bearish.

– Omkar Godbole

Read More: As Bitcoin Regains Lost Ground, Options Traders Bet on $52K Move By Late January

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