Former Federal Reserve Chairman Janet Yellen could become the next U.S. Treasury Secretary.
The Wall Street Journal reported Monday that President-elect Joe Biden plans to nominate Yellen in the coming days, positioning the longtime economist to succeed current Secretary Steven Mnuchin if approved by the U.S. Senate. While Yellen hasn’t said a lot about bitcoin, she is clearly familiar with the cryptocurrency and blockchain technology, and spoke about both while she was still in office at the Fed.
Here’s what she said.
Personal views on bitcoinRelated: Biden to Tap Former Fed Chair Janet Yellen as Treasury Secretary
It’s unclear how Yellen might approach crypto regulations, or if they’ll even be a priority. However, the Office of the Comptroller of the Currency (OCC), Federal Reserve, Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Asset Control (OFAC) all either work closely with the Treasury Department or are bureaus within the department.
Razvan Suprovici, founder of crypto gifting service Biterica, gifted $20 in bitcoin to Yellen after her 2018 remarks, though at the time she said she hadn’t looked into the gift. If she kept the funds, they would be worth about $60 at press time.
And there was also Bitcoin Sign Guy, who flashed a “buy bitcoin” note behind Yellen while she was testifying before a congressional subcommittee in 2017.
Related StoriesMore than 500,000 ETH have been locked and loaded into Ethereum 2.0’s deposit contract, kick-starting the network’s major, multi-year development phase. JPMorgan analysts say institutions are piling into bitcoin. And the IRS has again sent out (possibly erroneous) letters to crypto traders indicating they owe taxes on unrealized gains.
Top shelfTaxman knocketh
The Internal Revenue Service (IRS) is again sending mixed messages related to crypto trading and tax reporting obligations. Allegedly, “dozens of individuals” have received CP2000 letters detailing how much the IRS believes traders owe – based on gains from unreported crypto holdings in 2018, according to CryptoTrader.tax. However, as in years prior, it’s possible these traders never realized these gains and don’t owe anything. The issue may stem from how crypto exchanges report transactions to the IRS, using form 1099-K, which shows all transactions as generating revenue. Exchanges could prevent this issue by sending 1099-B reports to the IRS, which accurately mark gains and losses, TaxBit co-founder Austin Woodward told CoinDesk last time around, in March.
Institutional analysis
JPMorgan analysts say institutions are piling into bitcoin at a stronger pace this quarter than they were in Q3, according to the banking giant’s “Flows & Liquidity” report. Published Friday, the analyst report compares institutional to retail buying. For instance, Q3, retail customers bought $1.6 billion worth of bitcoin using Square’s Cash App, nearly three times more than what was invested in Grayscale’s bitcoin product. Though in Q4, the Grayscale Bitcoin Trust is at three times its Q3 numbers. To be sure, Square has yet to post numbers related to customers’ Q4 bitcoin buys. (Grayscale, like CoinDesk, is wholly owned by Digital Currency Group.)
Related: Blockchain Bites: XRP’s Rally, Chainalysis’ $1B Valuation, Bitcoin’s Volatility in Perspective
Gold bug to BTC ‘cockroach’
Pendal Group, an Australian Securities Exchange-listed investment manager with over A$100 billion (US$73.6 billion) in assets under management, is getting into bitcoin. Vimal Gor, Pendal’s head of bond, income and defensive strategies, said Monday the company is now investing in bitcoin futures on the Chicago Mercantile Exchange. As quoted by the Australian Financial Review, Gor thinks not only is bitcoin “entering the realm of mainstream,” as shown by the entrance of major hedge fund managers, but that “bitcoin is a cockroach that exists. They can’t ban it out of existence.” Pendal also reportedly aims to position BTC for their clients, as it previously has done with gold.
Crypto… currency?
In case you missed it, PayPal’s CEO Dan Schulman is bullish on bitcoin as an actual currency. Luckily for him, PayPal will soon allow its network of merchants to accept bitcoin payments. Appearing on CNBC’s Squawk Box on Monday, Schulman said bitcoin’s usefulness as a currency will co-exist with its buy-and-hold status. The CEO also said a central bank digital currency is a global inevitability, though that could bolster bitcoin’s utility. “I think that there’ll be more and more use cases for cryptocurrencies” that make bitcoin more widely accepted, more stable and probably “more valuable” over time.
E-money license
Crypto.com is trying to bulk up its Maltese financial licenses in search of a competitive edge across Europe. The Hong Kong-based crypto firm received preliminary approval from the Malta Financial Services Authority (MFSA) for two financial licenses that govern how payment companies operate and what services they can provide. Crypto.com could soon start offering payment services and issue e-money as a licensed financial institution with MFSA oversight. It could additionally execute, custody and deal in-house with customers’ crypto assets as one of the first-ever holders of a Class 3 Virtual Financial Assets license from Malta.
Powder keg
Bitcoin hurdled past $19,000 on Tuesday, with momentum to potentially reach its all-time high of $19,783 set on Dec. 17, 2017. Bitcoin broke the $17,000 level and then $18,000 level within the same week, and has rallied $7,000 in one month. The market capitalization of bitcoin also hit its all time high this week to about $329 billion, according to data provided by crypto analytic firm CryptoQuant. With increased institutional investors entering the bitcoin market, the ease of retail buying from PayPal and Square (among other providers) as well as miners not liquidating their positions, “it appears likely that price will continue to rise,” according to a newsletter by CryptoQuant on Nov. 13.
Related: Crypto Long & Short: 4 Metrics That Show How the Current Bitcoin Rally Is Different From 2017
Airdrops and inflows
XRP continues to rally, hitting a watermark of $0.79 early Tuesday, the highest since 2018. The world’s third-largest cryptocurrency by market value is up 130% from lows near $0.30 seen on Saturday. Analysts say a recent airdrop of 45 billion “spark” tokens to XRP holders related to a forthcoming smart contract platform developed by Ripple’s investment arm could be driving the price. Still, as XRP surges, selling pressure mounts: as evidenced by nearly $1 billion in XRP flowing into exchanges, possibly for liquidation.
Deposit set
Yesterday morning (in the U.S. at least), Ethereum pundit Anthony Sassano tweeted that 307,392 ETH ($181 million) had been allocated to a smart contract that would kick off the first phase of Ethereum 2.0, in what’s shaping up to be the largest blockchain overhaul to date.
That was nearly 220,000 ETH shy of the total amount needed to get things rolling on schedule. Exactly 524,288 ETH (worth over $325 million) needed to be locked up in the so-called deposit contract to begin the next phase of development by Dec. 1.
Yesterday evening, that amount was matched, a significant feat of community commitment. Now begins the hard part.
Ethereum will undergo a transition in consensus model, from the proof-of-work system implemented in Bitcoin to the proof-of-stake mechanism thought to improve blockchain scalability. Eth 2.0 will also see the implementation of sharding, another cryptographic technique meant to improve transaction throughput.
While the launch of the actual Eth 2.0 network is a ways off, on Dec. 1 a parallel proof-of-stake blockchain dubbed “the Beacon chain” will go live. In this initial phase of development, the PoW Ethereum and Beacon chain will exist side-by-side.
Those that pledged funds to the deposit contract will be validators on this experimental network, and earn rewards for processing transactions and creating new blocks. CoinDesk is just one of many network validators.
One potential reason funding for the deposit contract came down to the wire is the staked ether is irretrievable in the short term, at least until Ethereum 2.0 development progresses to a significant degree.
Viktor Bunin, a protocol specialist at blockchain infrastructure service provider Bison Trails, said that while some users may be put off by the one-way nature of staking ETH in the contract, “by and large the community is extremely excited to launch Eth 2.0.”
The Beacon chain activation is the first of four phases of the Ethereum 2.0 migration, which begins with the onboarding of validators and eventually leads to the full transition of all users and dapps to the new network.
“There’s not a chance that Eth 2.0 doesn’t launch,” Bunin told CoinDesk. “Eth 2.0 is a vision. It is a drive to improve Ethereum to scale support for the entire planet. Even if this launch is not successful for some reason, you can be sure that the community will learn from it and try, and try, again.”
Food for thought Related StoriesWhat’s behind this current run-up in the price of bitcoin? That’s a question for which many people want a definitive answer. So far, one unifying theory is tough to come by.
What we do know is that since mid-October the price of bitcoin shot up from the $11,000 range to the cusp of $19,000. And while prices are a few hundred dollars shy of its all-time high, bitcoin’s market cap recently set a record by breaking above $345 billion; since the mega-rally in 2017, more bitcoin has been mined and put into circulation.
For a large swath of market observers, the cause of the rally is clear: more buyers with deeper pockets. If so, that augurs well for continued gains. But there’s also a plausible theory that unusual circumstances have temporarily constrained supply, calling into question the rally’s staying power.
The case for demand: New moneyRelated: OKEx’s Withdrawal Suspension Isn’t Behind Bitcoin’s Rally: Analysts
It seems not a day goes by without some story of a major financial institution warming up to bitcoin, if not outright embracing it. A CIO at BlackRock saying on CNBC that it “could take the place of gold to a large extent.” An analyst at Citi saying bitcoin could reach $318,000 by the end of 2021. A report from JPMorgan claiming institutions are buying at three times the amount they were in the previous quarter.
The world is in the midst of a pandemic that is wreaking economic turmoil on every continent, even Antarctica. Central banks are printing fiat currency as fast as they can (funnily enough, Hewlett Packard’s stock is up 3% year to date). Governments are also in on the act, throwing trillions of dollars, euros and anything else they can borrow in an effort to stave off an economic calamity that would lead to social unrest and violence in the streets – or more of it.
Since its birth in the depths of the global financial crisis more than a decade ago, such potentially inflationary measures were exactly the sort of things bitcoin advocates warned about, and perhaps secretly hoped for, when they began stocking up on digital assets.
Then there’s the data. CoinDesk’s Galen Moore spells out in a recent piece four ways this current rally is different from the one of 2017. More “whale” accounts are holding 1,000 or more bitcoin than ever before, and unlike three years ago they have been growing in number with higher prices. Bitcoin and its closest rival, ether, are making recent highs together, whereas in 2017 ether’s record prices were in the rearview mirror for months after bitcoin was going higher. Regulated markets are part of the mix this time around, with the CME daily futures trading volume hitting north of $1 billion several days the past few months. And since the start of 2020 some 200,000 bitcoin have been sold by investors in East Asia to satiate the growing appetites of their counterparts in North America.
Related: First Mover: Near Record Highs, Bitcoin May Have a Volatile Week
These are all profoundly bullish signals. However, there remains a gnawing “why” question: Why just now?
After all, preliminary data on three vaccines for COVID-19 have shown an efficacy rate of 90% or higher. The very physical threat that loomed over workplaces and every aspect of everyone’s life may soon be gone. And even on the political front, uncertainty in the United States over who will run the federal government in a couple of months has also begun to dissipate.
The case for supply: Bottled-up bitcoinPart of what makes the narratives to the current run-up seem so attractive is they focus on the demand side of the explanation. Yet, as we all know, supply is the other side of the equation. Is there enough bitcoin to slake the thirst of all those new buyers who have entered the market, spurred by economic worries and egged on by analysts?
Months ago, supply was the big topic among those who talk about crypto. Bitcoin was undergoing a halving, whereby rewards given for successfully mining a block were cut in half. That would automatically lead to a surge in prices, went the theory, because there were going to be 900 fewer new bitcoin added to supply every day but there were new buyers added every day. This was back in early May; in the subsequent couple of months bitcoin’s price stayed around the $9,000 range. As halvings are known events programmed into bitcoin’s code since the very beginning, the market apparently wasn’t all too surprised when it actually happened.
Getting back to what else we know, one thing to add to that list is that in China, site of the lion’s share of bitcoin’s hash power, a government crackdown is taking its toll on some of the crypto exchanges that cater to the country’s miners and traders. The crackdown isn’t necessarily about halting crypto but rather trying to stamp out money laundering. It just so happens crypto exchanges are possibly, maybe, suspected in the mix. Thus executives at exchanges have been getting the third degree.
At OKEx, a key executive – literally, the guy who had the keys for OKEx’s addresses – went MIA and only recently resurfaced after spending some time talking to authorities in China. In the meantime, the allegedly Malta-based exchange was forced to halt withdrawals because, obviously, only one person had such keys for one of the world’s largest trading venues and he happened to be in China. It is hoped OKEx has figured out a contingency plan in case someone gets hit by a bus.
Oh, and the date this all started? Oct. 16. That happens to be a couple of days before the price broke out of the trading range between $10,000 and $12,000, where it had bounced around since July.
The case against supply: Business as usualThen again, just because one can’t withdraw bitcoin from OKEx, that doesn’t mean one can’t trade on it. In fact, open interest on its futures contracts are at $1.22 billion, according to Skew. That’s the biggest open interest figure for any exchange. The CME, for instance, is $200 million smaller.
While bitcoin can neither flow into or out of OKEx, its price is in line with those of its rivals.
“BTC’s price on OKEx is not that different from other exchanges,” Ki Young Ju, chief executive officer of data provider CryptoQuant, told CoinDesk’s Muyao Shen. “…[P]eople can trade their BTC on OKEx despite the withdrawal suspension.”
And miners are finding other venues to unload their newly minted bitcoin; Huobi, Binance and other exchanges seem to be picking up the slack, according to data from Chainalysis. Unfortunately, it hasn’t been Robinhood-easy for some miners to then convert their crypto into fiat (in this case, Chinese yuan) because of the money laundering crackdown.
Stay tunedThe two explanations for bitcoin’s bull run discussed above – new demand and bottled-up supply – are not mutually exclusive. Soon, at least one of them will be put to the test: OKEx is expected to allow withdrawals by Friday of this week.
“With all of the institutional flow around crypto, I don’t think the status of any single exchange is enough to affect prices beyond typical daily volatility,” George Clayton, managing partner of investment firm Cryptanalysis Capital, told CoinDesk’s Daniel Cawrey.
That may very well be the case. We will likely know by the end of this week. When we do, we’ll be finally able to figure out if this is a demand-driven or a supply-driven market. That is, if it was really about there being more buyers or if it was truly about there being fewer sellers.
In the meantime, keep an eye out for when OKEx allows withdrawals again.
– Lawrence Lewitinn
Today’s marketsBitcoin is trading at fresh 35-month highs above $19,000, having defended the psychological support of $18,000 during the Asian trading hours. The crypto market leader is now just 4% short of testing the record high of $19,783.
Hence, most alternative cryptocurrencies, which are still down significantly from their respective lifetime highs, are beginning to look relatively cheap. For instance, ether, the second-largest cryptocurrency by market value, is down at least 57% from the peak price of $1,431 reached in January 2018, despite having gained over 50% this month alone.
Should bitcoin’s uptrend slow, investors could rotate money to cheap alternative cryptocurrencies. “During aggressive rallies in the price of bitcoin, market participants sell their alternative cryptocurrencies for bitcoin to capture the upside. Once bitcoin slows down, the capital flows back into alternative cryptocurrencies, and a valuation parity is found,” Nicholas Pelecanos, head of trading at NEM Ventures, said.
In traditional markets, U.S. stock futures are flashing green while gold and the U..S. dollar are nursing losses. Risk sentiment remains firm on coronavirus vaccine optimism and ebbing political uncertainty in Washington, D.C. President Trump said his aides would cooperate with President-elect Joe Biden’s transition to the White House, easing concerns about a drawn-out period of uncertainty.
– Omkar Godbole
Bitcoin watchBitcoin looks to be replicating moves seen following the 2016 mining reward halving.
The leading cryptocurrency by market value has rallied by $9,000 in the past seven weeks and looks set to challenge the all-time high of $19,783 reached in December 2017.
Notably, the cryptocurrency is closing on record highs 6.5 months following its third mining reward halving, which took place on May 11 this year. Reward halving refers to a programmed 50% reduction in block rewards executed every four years to keep inflation under check.
The latest move toward record highs looks similar to the one seen four years ago.
Bitcoin underwent its second halving on July 9, 2016, when prices were trading near $650. By the end of February 2017, that is, seven months after halving, the cryptocurrency had set a new peak price above the November 2013 high of $1,163.
The rally did not stop there, and the cryptocurrency went on to hit a record price of $19,783, as noted earlier. If history is a guide, bitcoin could see a significant rally in 2021.
Most analysts expect bitcoin to explore the uncharted territory above $20,000 over the next 12 months, courtesy of increasing institutional participation and bitcoin’s growing appeal as an inflation hedge.
According to Su Zhu, CEO of Three Arrows Capital, $36,000 is the level to watch out for once the cryptocurrency establishes a foothold above $20,000.
“This [$36,000] is the strike with the largest bitcoin open interest on Deribit exchange, the dominant market leader in bitcoin and ether-settled options trading,” Zhu tweeted.
– Omkar Godbole
What’s hotThe biggest update in Ethereum’s history will begin its first phase on Dec. 1.
Per a tweet by ETH 2.0 Researcher Justin Drake, Ethereum 2.0’s Beacon Chain’s launch has been set for Dec. 1 at 12:00 UTC.
The backbone of Ethereum 2.0, the Beacon chain is an interim blockchain that will operate alongside the current network as it begins the first of four migration phases to the new network.
Related: IDEX Plants a Flag for a Multichain Future, Beginning With Binance Chain and Polkadot
Yesterday, the deposit contract for the Beacon chain received the minimum ETH necessary to lock in Eth 2.0’s “genesis day” of Dec. 1.
All of Ethereum 2.0’s primary implementations have agreed upon the same “genesis state root” of the new blockchain – or, its precise origins in the code.
Read more: Ethereum 2.0 Deposit Contract Secures Enough Funds to Launch
ETH’s price ran up in anticipation of the upgrade and is currently resting just above $600.
Related StoriesIDEX is betting three chains are better than one.
The non-custodial cryptocurrency exchange, whose operations run on the Ethereum blockchain, announced Tuesday it plans to expand to the Binance Smart Chain and Polkadot networks. Hence, every holder of IDEX’s Ethereum tokens will get an equivalent number of IDEX tokens for each of the new chains.
“If you think about it from a business perspective for us, we’re thinking about, where can we give customers new networks to trade?” IDEX CEO Alex Wearn told CoinDesk in a phone interview.
Related: Ethereum 2.0’s Genesis Day Is Officially Set for Dec. 1
While it remains to be seen whether volume on the new smart contract chains can ever compete with that on Ethereum, IDEX is taking these measures “so we can put a stake in the ground and plant our flag early,” Wearn said.
The new tokens will be distributed on Dec. 7 and IDEX holders will need to claim them promptly or they will revert to a community fund whose use will be determined later. Wearn said he expects IDEX trading to go live on the new chains early in 2021, optimally both in the first quarter.
IDEX aims to be a non-custodial exchange that can compete with fully centralized ones. To that end, it takes a hybrid approach where it centralizes trade executions and decentralizes settlement and storage. Wearn said its design reflects a commitment to keeping user assets out of IDEX’s control.
The design is also meant to offer many of the features that centralized exchanges can but decentralized exchanges (DEXs) so far largely cannot, such as high-speed order matching. (IDEX tokens are used for staking by the nodes that validate transactions on the exchange’s off-chain ledger; validators are paid for their work in additional tokens, and can lose their stake if they misbehave.)
Related: CoinDesk Is Spinning Up an Ethereum 2.0 Node. Here’s How to Follow Our Journey
The company intends to expand to other chains as it makes sense to do so, but is starting with Polkadot and Binance Smart Chain because both are fully compatible with the Ethereum Virtual Machine (EVM).
More details remain to be worked out for Polkadot than Binance Smart Chain. On the latter, Panama-based IDEX is basically ready to go, with some details on the application side still to be worked out.
To be clear: IDEX’s move does not signal the arrival of seamless trades across chains. A user who wants to trade, say, ether (ETH, the native token of Ethereum) for a token that’s only available on the Binance chain would first need to move the ETH through a “bridge” to the latter.
“Pure cross-chain trading is still many, many years away,” Wearn said.
Related StoriesThe tax department in Lithuania has sold off confiscated cryptocurrencies for the first time, bringing in €6.4 million, or $7.5 million.
See also: US Seized More Than $1B in Silk Road–Linked Bitcoins, Seeks Forfeiture
Related StoriesVeteran open source Bitcoin developer John Newbery just launched Brink, an independent organization for funding Bitcoin’s open source developer community, a key component driving the global currency and making it work.
Tuesday, Newbery and fellow Bitcoin Optech associate Mike Schmidt unveiled Brink, with prolific Bitcoin technical writer Dave Harding joining the board as independent director. Brink will dole out grants to developers working on Bitcoin projects, as well as help fledgling Bitcoin developers embark with fellowships and mentoring.
Newbery told CoinDesk he launched Brink to “further decentralize Bitcoin development funding” and to onboard and mentor new contributors “which hasn’t been a priority for other funding organizations.”
Related: Cypherpunk, Crypto Anarchy and How Bitcoin Lost the Narrative
Investors John Pfeffer and Wences Casares are providing “organization funding,” while the non-profit Human Rights Foundation, Square Crypto, and crypto exchange Gemini are funding the first two fellows; Bitcoin exchange Kraken is funding the first grant.
Read more: BitcoinACKS Lets You ‘Sponsor’ Bitcoin Development
A huge reason bitcoin works as a global currency at all is that developers are constantly tinkering under the hood to build and test its underlying infrastructure. Traditionally, these developers have done this work out of passion in their spare time without a paycheck.
But things are changing as more and more organizations are looking to pay Bitcoin developers. Last summer alone, at least half a dozen companies in the space announced new grants for developers.
Fueling Bitcoin development by donationsRelated: Gazprombank Switzerland Executes First Bitcoin Trades, Announces Payments Initiative
Brink’s funding model is a bit experimental. For the most part, Bitcoin organizations such as Chaincode and Square Crypto tend to distribute grants directly to developers from their own central funding pools.
Brink’s model is unique in that funding comes from donations from diverse sources.
There might be companies that want to support Bitcoin development but that don’t want to have to vet developers to fund. Instead, these organizations can donate to Brink, which will vet and train developers.
Read more: Summer 2020 Is Funding Season for Open-Source Bitcoin Development
Fueling this path, Brink is applying to be the first Bitcoin organization to apply for charitable 501(c)(3) designation in the U.S., so taxpayers can make tax-exempt donations to the developers funded by Brink.
“We will be the only organization solely devoted to Bitcoin development that takes direct donations from the public in this way,” Brink’s press release explains.
Related StoriesCoinDesk just snagged a front-row seat to a seminal event in the crypto industry. Ticket price: 32 ETH.
As a media outlet covering nascent technologies, we believe we can sometimes chronicle their development more effectively by participating in them. To that end, we’re spinning up a validator for the upcoming launch of Ethereum 2.0 as part of a fact-finding mission. This required us to acquire the minimum amount of ETH (for about $15,000) to stake on the new network.
The goal is to deepen CoinDesk’s editorial coverage to better serve our readers. Running our own validator will give us a direct, real-time window onto Ethereum’s transition to a proof-of-stake (PoS) consensus mechanism. We will gain an unvarnished perspective on the network at its most untested and potentially vulnerable phase of development, gleaning vital insights about the process for our audience.
Related: Ethereum 2.0’s Genesis Day Is Officially Set for Dec. 1
The launch of Ethereum 2.0 will mark the beginning of the network’s transformation into the world’s largest proof-of-stake (PoS) protocol by market capitalization. The pivot to PoS is intended to radically improve network scalability, which throughout Ethereum’s history has been an ongoing pain point for both users and developers.
To be clear, this is not the start of a day-trading division within our newsroom (and for the record, we have strict limitations on such activity). All profits from running the validator will be donated to a charity of our choosing once transfers of ether are enabled in phase 1.5 of the network’s development, roughly a year and a half from now.
We’re also paying out a cut of our staking rewards in modest fees to service provider Bison Trails. Bison Trails announced its support for Eth 2 staking back in July. The company provides a fully managed infrastructure for validators backed by a 99% uptime guarantee and enterprise-grade monitoring support.
You can follow us on our staking journey as an Ethereum 2.0 validator by signing up for our free, limited-run newsletter, Valid Points. Each week, starting the week of the Ethereum 2.0 launch (expected around early December), our emails will feature high-level statistics and charts illustrating the health of our validator and network operations. We’ll also discuss the wider ramifications of the network’s development progress for industry stakeholders (no pun intended) and investors.
Related: IDEX Plants a Flag for a Multichain Future, Beginning With Binance Chain and Polkadot
Sign up for Valid Points today.
Email:Crucially, this is not just a story about code and network design. This is also an investor story.
We believe having skin in the game puts us in a unique position to adopt the mindset of existing and prospective investors. That’s important because the decision to stake or not involves a trade-off. Should I tie up my funds in a validator node or should I earn interest on them via a decentralized finance (DeFi) lending app?
The pros and cons of such decisions will vary due to a host of factors. We are looking forward to exploring the ever-shifting cost-benefit analysis that investors go through in this environment by putting ourselves in their shoes.
Many questions remain, including how exactly Ethereum will merge into Ethereum 2.0, what impact the merger will have on Ethereum’s growing DeFi ecosystem and the extent to which Ethereum 2.0 will solve the platform’s congestion issues over the long run.
It’s going to be a fascinating ride, and you’re invited to join us.
Related StoriesGazprombank (Switzerland), an arm of the bank owned by Russian energy giant Gazprom, has carried out the first client transactions as part of its new bitcoin services.
Announced Tuesday, the bank’s launch of institutional cryptocurrency services comes after approval was granted by the Swiss Financial Market Supervisory Authority.
“Digital assets will become increasingly important for our clients and the global economy,” said the bank’s CEO, Roman Abdulin.
Related: Cypherpunk, Crypto Anarchy and How Bitcoin Lost the Narrative
The cryptocurrency services, including cryptocurrency accounts, investment management and asset custody, were developed in partnership with fintech firm Avaloq and digital security infrastructure provider METACO.
Gazprombank (Switzerland) said it has also become a member of the OpenVASP association, which aims to develop an open protocol for the transmission of transaction information between virtual asset service providers (VASPs) and individuals. This work seeks to make it easier for cryptocurrency services to align with regulatory guidance from the Financial Action Task Force – including the so-called travel rule.
In partnership with Swiss crypto finance firm Bitcoin Suisse, the bank is also working on a uniform communication protocol for digital-asset payments between members of OpenVASP, according to the announcement.
See also: Swiss Canton Zug to Accept Taxes in Bitcoin, Ether From Next Year
Related StoriesCryptocurrency exchange Binance is to offer options contracts for the world’s seventh largest cryptocurrency, litecoin.
See also: Binance Discontinues UK Pound Stablecoin Calling It Just an ‘Experiment’
Related StoriesPendal Group, an Australian Securities Exchange-listed investment manager with over A$100 billion (US$73.6 billion) in assets under management, is getting into bitcoin.
As reported by the Australian Financial Review on Monday, Vimal Gor, Pendal’s head of bond, income and defensive strategies, said with the cryptocurrency “entering the realm of mainstream,” the company is now investing in bitcoin futures on the Chicago Mercantile Exchange.
“All the big hitters in the hedge fund world are coming out to endorse bitcoin,” said Gor, alluding to Paul Tudor Jones II and Stan Druckenmiller, billionaires who’ve both this year disclosed owning some of the premier cryptocurrency by market cap.
Related: Cypherpunk, Crypto Anarchy and How Bitcoin Lost the Narrative
While most large institutions have stayed away so far, client demand prompted the move, said Gor.
“We have been positioning in gold for our clients for many many years now. Now we’re doing it with bitcoin,” he said.
Bitcoin’s draw hinges on the fact that diminishing yields amid central banks’ aggressive quantitative easing policies mean government bonds are losing their attraction among high-net-worth individuals. They will eventually “turn into a dead asset class” as people turn to alternatives like gold and cryptocurrencies, according to Gor.
With the eventual digitization of the economy spurred by this year’s global pandemic, the Pendal Group executive said the global financial system will simply “evolve” with cryptocurrency sticking around in the years to come.
Related: Gazprombank Switzerland Executes First Bitcoin Trades, Announces Payments Initiative
“Bitcoin is a cockroach that exists. They [governments] can’t ban it out of existence.”
See also: Mexican Billionaire Reveals 10% of His Liquid Assets Are in Bitcoin
Related StoriesBitcoin (BTC) passed above $19,000 on Tuesday, after rallying $7,000 in one month. The leading cryptocurrency is now within sight of its all-time high of $19,783 reached on Dec. 17, 2017.
XRP has chalked up an impressive rally to two-year highs in the last few days, and a coming airdrop may be driving the gains.
Trading around $0.70 at the time of writing, the world’s third-largest cryptocurrency by market value is up 130% from lows near $0.30 seen on Saturday. Prices reached a high of $0.79 earlier on Tuesday, the highest level since May 10, 2018, according to the CoinDesk 20.
On-chain activity has picked up the pace alongside the price rally, with the new account activations on the XRP Ledger rising more than 200% to a record high of 5,562 in the past five days, according to data source XRPScan.
Related: Bitcoin Breaks $19K, New All-Time High Seems Imminent
Analysts are associating the surge in XRP’s price and other metrics with the smart contract platform Flare Network’s airdrop of “spark” tokens to XRP holders.
The free distribution of 45 billion spark tokens, based on a snapshot of XRP addresses on Dec. 12, is supported by Ripple’s investment arm RippleX (formerly Xpring).
“The impending airdrop is supercharging the XRP bull market and whipping mindshare of one of the largest crypto communities into a frenzy,” according to Jehan Chu, a managing partner at Hong Kong-based blockchain investment firm Kenetic Capital. “With the imminent launch of Flare, a smart contract utility fork of XRP, the pair will attempt to challenge Ethereum’s dominance in decentralized finance and decentralized applications.”
Flare integrates with Ethereum’s Virtual Machine allowing existing Ethereum decentralized applications (dapps) to be ported over to Flare to serve the XRP ecosystem.
Related: Market Wrap: Bitcoin Briefly Drops Below $18K While ETH Uncouples From BTC
Some of the major cryptocurrency exchanges, including South Korea’s Bithumb and Luxembourg-based Bitstamp, have announced support for the token drop.
XRP inflows spikeExchange inflows of XRP have soared alongside the price rally, suggesting increased selling pressure in the market.
Nearly 2.3 billion XRP, worth nearly $1 billion, have been transferred to cryptocurrency exchanges since Saturday. That’s more than three times the average daily inflow seen in 2019, according to blockchain intelligence firm Chainalysis.
Investors typically transfer coins to exchange when they want to liquidate their holdings, boosting supply in the market and take direct custody of coins when prices are expected to rally.
According to Chainalysis economist Philip Gradwell, the inflow rise doesn’t necessarily imply an imminent sell-off.
“Demand has been strong so far, with median trade intensity twice the average,” Gradwell tweeted. Median trade intensity, which measures the number of times an inflowing coin is traded, stood at 14 on Monday – significantly higher than its 365-day average of 5.8.
Also read: XRP Rises More Than 30% as Altcoins Piggyback on Bitcoin’s Wave
Related StoriesCrypto.com is trying to bulk up its Maltese financial licenses in search of a competitive edge across Europe.
The Hong Kong-based crypto firm received preliminary approval from the Malta Financial Services Authority (MFSA) for two financial licenses that govern how payment companies operate and what services they can provide.
Crypto.com could soon start offering payment services and issue e-money as a licensed financial institution with MFSA oversight. It could additionally execute, custody and deal in-house with customers’ crypto assets as one of the first-ever holders of a Class 3 Virtual Financial Assets license from Malta.
Related: Y Combinator, Pantera Back $3M Investment in New Crypto Derivatives Exchange
But the licenses are only granted in-principle for now. Crypto.com Chief Executive Kris Marszalek told CoinDesk they will become full licenses once the company satisfies a set of MFSA conditions. He refused to elaborate on what those conditions are or when they will be met.
Assuming they are, Crypto.com could be well positioned to deal across a continental bloc in the midst of expanding its crypto licensure regime. The European Commission recently proposed a comprehensive framework for cryptocurrencies called Markets in Crypto-Assets (MiCA) that would impact the entire EU.
State-level actions on crypto regulation have generally been harder to come by. But Marszalek said Malta is one of the few countries with “clear regulations on crypto.” Notably, Binance was said to have been based in Malta until MFSA announced in February 2020 that the crypto exchange was “not authorised” to operate there.
The licenses “will allow us competitive advantage to non-licensed firms and once MiCA is in place across Europe, and possibly grandfather us into the pan-European digital assets legislation which is currently being reviewed,” he said.
Related StoriesThe smart contract required for triggering the first phase of Ethereum 2.0 has enough funds to begin activation of Ethereum’s most ambitious upgrade yet, which will radically shift Ethereum’s economic model, resource usage and governance.
The Ethereum 2.0 deposit contract, which was released in early November, has accrued more than 540,000 ETH ($300 million) late Monday night, ensuring that the beacon chain for Ethereum 2.0 will launch next week, formally beginning the second-largest cryptocurrency’s shift from a proof-of-work consensus mechanism to a proof-of-stake one in hopes of solving a number of issues, including scalability.
The Ethereum Foundation had previously set a soft launch date for Dec. 1, assuming the deposit contract saw 524,288 ETH staked by Nov. 24. It hit the target with hours to spare, after more than 150,000 ETH were deposited in a 24-hour period.
Related: Ethereum 2.0 Deposit Contract Is 75% Funded Ahead of Dec. 1 Soft Launch
The last 25% of the ETH needed to trigger the contract was deposited in four hours. The contract held just 385,440 ETH as of 22:45 UTC on Monday.
Ethereum saw its price rise nearly 10% over a 24-hour period Monday, surpassing $600 for the first time in two years.
Beacon chainTo be clear, the network itself isn’t launching just yet. The launch of Ethereum 2.0 will activate a parallel proof-of-stake blockchain dubbed “the beacon chain” to run in parallel alongside the existing Ethereum network. The initial phases of its development will not impact existing users and decentralized applications on Ethereum.
The primary stakeholders of the beacon chain at Ethereum 2.0 launch will be validators, the equivalent to miners on a proof-of-stake network. Like miners, validators earn rewards on the network in exchange for processing transactions and creating new blocks. In order to become an Ethereum 2.0 validator, a user must stake a minimum of 32 ETH through the deposit contract.
Related: New GnosisDao Bets on ‘Futarchy,’ a Prediction-Market Governance Model
Read more: Everything You Need to Know About Ethereum 2.0
At the outset of the network, validators are expected to earn roughly a 20% annualized reward on their staked ETH. More than 16,300 validators will be securing the network at launch.
The beacon chain activation is the first of four phases of the Ethereum 2.0 migration, which begins with the onboarding of validators and eventually leads to the full transition of all users and dapps to the new network. There are several theories on how the crypto markets will react to the dual blockchain system of Ethereum in the interim before the full migration is complete.
Speaking to the uncertainty, Danny Ryan, Ethereum 2.0 coordinator and Ethereum Foundation developer, told CoinDesk in an interview back in July: “I very much believe that [Ethereum 2.0] adds a ton over time to the intrinsic value of the system … I think that crypto markets are pretty wild and new and people have trouble figuring out how to value these things but in terms of intrinsic value [Ethereum 2.0] is an incredible upgrade that is going to enable Ethereum to be the backbone of a decentralized internet.”
Related StoriesFor the second year in a row, the Internal Revenue Service (IRS) is warning cryptocurrency investors they underreported their holdings. But it may be another false alarm.
“Dozens of individuals” recently received notices that they owe taxes on gains from crypto holdings that they did not report when filing in 2018, according to a blog post published Monday by tax software provider CryptoTrader.tax.
Shehan Chandrasekera, head of tax strategy at CoinTracker, said he’d also heard of crypto investors receiving these letters this year.
Related: PayPal’s Crypto Offering May Be ‘a Huge Headache’ for Taxpayers
The form CP2000 letters state how much the IRS believes the users owe and provide due dates for payment. However, the users likely never realized these gains, and don’t actually owe these funds, CryptoTrader.tax said.
Similar letters were sent to crypto exchange users last year. At the time, Justin Woodward, the co-founder of TaxBit, another software vendor, told CoinDesk that people received letters because their exchange reported transactions to the IRS using form 1099-K. This IRS form shows all transactions as generating revenue, even if some transactions actually resulted in a loss for the user.
As a result, an exchange might report a dramatically inflated tax burden for the user. The letters sent in 2019 were for the 2017 tax year.
The same issue appears to be occurring this year, according to CryptoTrader’s blog post.
Related: Tax Payers Needn’t Disclose Merely Holding Crypto: IRS Draft 2020 Guidance
“These CP2000 cryptocurrency-related tax mishaps all stem from the fact that Coinbase and other exchanges use Form 1099K to report crypto proceeds to the IRS. This is a problem,” the blog post said.
According to a photo on CryptoTrader’s blog post, at least one Coinbase user is definitely affected. It is unclear whether users from other exchanges are also receiving these letters.
Users who receive one of these forms should calculate their actual gains and losses, and report those to the IRS, the post said.
Exchanges could prevent this issue by sending 1099-B reports to the IRS, which accurately mark gains and losses, rather than the merchant-focused 1099-K forms, TaxBit’s other co-founder Austin Woodward told CoinDesk in March.
At the time, he said that “there was never any clear IRS guidance that [the 1099-K] was the correct form.”
Spokespersons for the IRS and Coinbase did not immediately return requests for comment.
Related StoriesAustralia-based West Coast Aquaculture (WCA) has completed an A$5 million (US$3.65 million) initial public offering, becoming the first firm in the nation to use cryptocurrency for its capital raise.
In an announcement provided to CoinDesk on Monday, fintech firm STAX said it had assisted WCA in raising just over 89%, or just over A$4.4 million (US$3.2 million), of the total raise via the stablecoin tether (USDT), a cryptocurrency with its price linked to the U.S. dollar on a 1:1 basis. The remaining funds were raised in Australian dollars.
“We are proud to be part of this historic moment in Australian investment history, said Neo Ching Hoe, CEO and founder of WCA. “We hope this bold initiative helps open the door to more global investment for local companies.”
Related: Alleged Promoter of BitConnect Crypto Scam Charged in Australia
WCA, an international fisheries company with an Asia Pacific presence, will put the funding towards expanding its operations and building out its supply chain, per the announcement.
See also: ASX Delays Launch of DLT System Over Coronavirus Trading Volatility
STAX describes itself as Australia’s first capital-raising platform to accept both cryptocurrency and Australian dollars.
“The successful WCA capital raise and IPO, paves the way for the future of capital markets in Australia”, said STAX CEO Kenny Lee. “We are allowing access to a market which has been hard for overseas investors to get into, and it will only benefit Australian businesses longer term.”
Related: Airbnb’s IPO Prospectus Says Firm May Consider Crypto and Blockchain
WCA has now listed for trading on the Sydney Stock Exchange under the SSX code 833.
Related StoriesThe smart contract that will trigger the first phase of Ethereum’s most ambitious upgrade yet has nearly accrued enough funds to activate.
The Ethereum 2.0 deposit contract currently holds 385,440 ($231 million) of the requisite 524,288 ETH required to activate Ethereum 2.0’s beacon chain, the central nervous system of the completely rebooted network. This represents roughly 75% of the threshold needed to activate the upgrade.
The Ethereum Foundation set a soft launch date for the new Ethereum network of Dec. 1, so if the deposit contract reaches 100% of the necessary deposits by, for instance, Nov. 24, then the Beacon chain will go live Dec. 1.
Related: New GnosisDao Bets on ‘Futarchy,’ a Prediction-Market Governance Model
The activation event can be triggered after this timeframe as well, so if the deposit contract hits its minimum on Nov. 25, for example, then the Beacon chain will activate on Dec. 2 (or if the threshold is reached by Nov. 26, it will activate on Dec. 3, and so on).
‘Not a chance that Eth 2.0 doesn’t launch’After something of a sluggish start, interest in the deposit contract has grown over recent weeks. Viktor Bunin, a protocol specialist at blockchain infrastructure service provider Bison Trails, said the tepid start was the result of a “convergence of factors,” including issues with the Medalla testnet and developers pushing later-than-expected updates for Prysm and Lighthouse, Ethereum 2.0’s primary software implementations.
Addressing one of the main criticisms against the deposit contract, Bunin said that while some users may be put off by the one-way nature of staking ETH in the contract (once ETH goes into Ethereum 2.0, it can’t come out), he said that “by and large the community is extremely excited to launch Eth 2.0.”
“There’s not a chance that Eth 2.0 doesn’t launch,” Bunin told CoinDesk. “Eth 2.0 is a vision. It is a drive to improve Ethereum to scale support for the entire planet. Even if this launch is not successful for some reason, you can be sure that the community will learn from it and try, and try, again.”
Related StoriesBitcoin’s price has been up dramatically since the very day popular exchange OKEx announced the suspension of all crypto withdrawal service on its platform. However, while some tie the two together, many market observers do not see a reason to associate the latest price rally with OKEx’s issues.
While the price of bitcoin gained significantly since the market sell-off in March, the most recent bullish run began just as OKEx said it suspended all crypto withdrawals because one of its key holders has “been out of touch.”
However, the suspension of withdrawals on OKEx had little impact on bitcoin’s price over the past month, said Ki Young Ju, chief executive officer of CryptoQuant.
Related: Market Wrap: Bitcoin Briefly Drops Below $18K While ETH Uncouples From BTC
“BTC’s price on OKEx is not that different from other exchanges,” he said. “…[P]eople can trade their BTC on OKEx despite the withdrawal suspension.”
The Malta-based crypto exchange still remains the No. 1 position for bitcoin futures open interest, currently worth $1.22 billion, according to data source Skew.
OKEx said Thursday it will resume withdrawal service as soon as this week, after founder Mingxing “Star” Xu was said to have been released from police custody in China. Jay Hao, chief executive officer of OKEx, told CoinDesk its high open interest is a positive indicator for his company.
“These are encouraging signs that confidence in the exchange remains high and I believe that even if some users decide to withdraw their funds [as soon as withdrawals are open], which is their total and absolute right, they will soon come back to OKEx,” Hao said through a spokesperson on Telegram.
Decreased Chinese miners’ impact on pricesRelated: More Institutions Are Buying Bitcoin, Say JPMorgan Analysts
Bitcoin’s volume from miners to OKEx has also dropped to almost zero since the news came out, as data from Glassnode show.
The muted bitcoin transfer volume from miners to OKEx, whose users are largely Chinese, is in line with the argument that the price surge is partly due to drying up in supply. Miners in China are struggling to turn their bitcoin into cash because of a government crackdown on Chinese exchanges.
Darius Sit, founder of Singapore-based trading firm QCP, connects the situation for miners in China with the market, telling CoinDesk that instead of going to other platforms, miners may have been holding on to their bitcoins as prices continue to climb, causing a tightened bitcoin supply.
Yet, others have largely disagreed with such contentions, saying the supply of bitcoin affected by OKEx’s withdrawal suspension is relatively small.
“As a class, miners aren’t that large a group of sellers,” Ryan Watkins, bitcoin analyst at Messari, told CoinDesk in a Telegram message. “[They are] definitely not enough to drive the price up as high as it is.”
Instead, Watkins pointed out the recent bitcoin rally is mostly driven by the demand side, as institutional investors in North America have been buying bitcoin in large amounts.
The “perfect” timing of OKEx’s suspension and the price rally could be purely coincidental, Watkins added.
Data from Chainalysis also indicate that after mining pools stopped sending bitcoin to OKEx, their newly minted cryptocurrency instead flowed to Binance and Huobi, both of which are also widely used in China.
Binance, Huobi and OKEx in total received 46% of bitcoin sent to exchanges from mining pools in the past 12 months, according to a Nov. 12 report from Chainalysis.
Colin Wu, a journalist based in China who first reported the Chinese miners’ selling problem in his blog, told CoinDesk in a WeChat message that Western media outlets have largely “exaggerated” what he wrote, saying the difficulties Chinese miners have had selling bitcoin should have had a minor impact on the recent price rally.
“The misunderstanding is that Chinese miners stopped selling coins and caused bitcoin to rise, which is illogical,” Wu wrote in a tweet thread. “They did not stop selling coins. … It was just a little troublesome and the number of miners in China has been decreasing. Miners are moving to the United States and Kazakhstan.”
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