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A pending U.S. Supreme Court case has the potential to fundamentally change white-hat hacking. The case looks at the Computer Fraud and Abuse Act (CFAA) and could determine whether good-faith security researchers, also known as white-hat hackers, could be subject to criminal penalties for researching vulnerabilities in systems. 

If a broad interpretation of the CFAA is decided on, it would impact not just blockchain technology, exchanges, and crypto, but the field of security research as a whole. 

And then blockchain voting company Voatz waded into the discourse. 

Van Buren v. the United States

Related: The Web Wasn’t Built for Privacy, but It Could Be

The Supreme Court is currently hearing Van Buren v. United States, in which a former Georgia police officer was convicted under the CFAA for looking up a license plate in a law enforcement database in exchange for money. The charge under the CFAA centered around the law’s definition of what “exceeds authorized access,” which is notoriously vague. 

The CFAA is an anti-hacking law that went into effect in 1986.  If the court sides with a broad interpretation of the law (as the government is arguing for) it could have a chilling effect on important security research, according to experts. 

A broad interpretation would allow companies to lay out what “authorized access” means in their terms of service, rather than implementing a technical barrier (like a password) in a system that would alert security researchers when they’ve gone too far. 

Enter Voatz

Voatz has repeatedly been the subject of critical security research, which CoinDesk has previously documented. In one instance, MIT students reverse-engineered the Voatz app and found security vulnerabilities. Voatz initially refuted these findings, though some of the issues were later confirmed by Trail of Bits, a security firm hired by Voatz. The company even went so far as to refer the student security researcher to state authorities for alleged “unauthorized activity” under the CFAA. 

Related: Twitter Tightens Security Ahead of US Presidential Election

The Electronic Frontier Foundation (EFF) criticized Voatz by name in a brief filed with the court, as an example of a company that takes an aggressive approach to good-faith security researchers. Voatz also reported a University of Michigan student to the Federal Bureau of Investigation “because the student conducted research into Voatz’s mobile voting app for an undergraduate election security course,” according to the brief.

Voatz has since filed an amicus brief in the Van Buren case (to which it is not a party) making the case for keeping the CFAA’s scope broad. It suggested that white-hat hackers should conduct their investigations into potential vulnerabilities only once they have alerted the company they are evaluating and received its blessing. 

Such practices are not common in the security community, though white-hat hackers do alert companies to vulnerabilities if they’re found. 

Security researchers clap back

In response to Voatz’s filing, a bevy of security researchers and organizations penned an open letter to publicly correct the record. 

The letter was spearheaded by Jack Cable, one of the world’s top ethical hackers. Cable is also an undergraduate at Stanford University “doing incredible work” in the cybersecurity and elections space, according to Reed Loden, Chief Open Source Security Evangelist at HackerOne, a platform that previously cut ties with Voatz, and whose founder was a signatory to the letter. It was the first time HackerOne has removed a company who used it to host a bug-bounty program.

“We wanted to make it clear that Voatz’s position is not supported by the cybersecurity and security researcher community, emphasize that security researchers contribute greatly to the security of our digital society, and underscore that a broad interpretation of the CFAA, which is what Voatz is advocating for, threatens security research activities at a national level,” said Loden in an email. 

The letter lays out the ways that Voatz’s filing was allegedly self-serving, and an indicator of how companies like Voatz might use a broad interpretation of the CFAA to further crack down on critical security researchers. 

Voatz did not respond to CoinDesk’s requests for comment.

The extent of ‘authorized access’

The Center for Democracy and Technology’s (CDT) is one of the signatories to the open letter. Stan Adams, the CDT’s deputy general counsel and Open Internet counsel, broke the case down into two arguments in a phone call with CoinDesk. 

According to Adams, if a broad ruling is made on the CFAA, security researchers would likely be discouraged from conducting research for fear of violating the “exceeds authorized access” part of the law. 

A broad interpretation would allow companies to lay out what “authorized access” might mean in their terms of service, which can be easily changed and altered, putting security researchers at greater risk. 

“Vague laws like the CFAA can kill security research,” said Adams. “The United States government wants access to be able to be limited by things like terms of use and other written expressions of access limitations, rather than what we would prefer, which is some sort of technical barrier.”

The idea is that a researcher, if governed by a technical barrier such as a password or encryption device, would know they’ve reached the limits of their authorized access. Laying out the limits of authorized access in a hard-to-find and even harder-to-read terms of service would leave security researchers guessing and create a chilling effect on research overall, he added. 

A chilling effect on fintech and crypto researchers?

The impact on research doesn’t just apply to companies like Voatz, though one would be hard pressed to argue that a company engaging in digital voting doesn’t warrant intense scrutiny. 

Tech across the board would be impacted. Matt Hill, CEO of open-source, privacy-tech startup Start9 Labs, said white-hat hacking is key for any kind of tech. Without it, simple software bugs could become systemic infections, ones that could be exploited by malicious actors. The cryptocurrency world has seen such actors empty exchanges and steal people’s cryptocurrencies. 

“An honest organization determined to build secure products will encourage white-hat attacks, no matter how bad the results, because that is the only way for their system to become secure,” said Hill. 

“An organization trying to sell a lump of clay packaged as security, also known as vaporware, or a scam, will do everything it can to prevent attacks – to maintain the internal delusion and external illusion for as long as possible.”

A white-hat safe harbor

Jason Gottlieb, a partner at Morrison Cohen LLP and Chair, White Collar and Regulatory Enforcement Practice Group, said that in his view, until Congress amends the CFAA to clarify what “unauthorized access” means, the CFAA should be interpreted in a way that provides a safe harbor for white-hat hacking. 

To be clear though, he said the hacking must be truly white hat and the burden should lie with the white hats to demonstrate that their intentions were to help rather than harm.    

“White-hat hacking is a key component of any data security program implementation, and has been for a very long time,” said Gottlieb. “Given the increasing importance of cybersecurity in the blockchain and cryptocurrency industries, we should be encouraging transparent white hat hacking as a way to make all systems better.”

Adams confirmed a broad ruling could encourage fintech companies and crypto exchanges to come down hard on white-hat hackers, given “they have strong incentives to not be perceived as flawed.” That being said, he also recognized that companies could also want to be secure, given it’s the public’s money on line at the end of the day. 

“Regardless, security by obscurity is not the way forward,” said Adams. “The CFAA is a pretty heavy hammer to wield.”

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Building an anonymous central bank digital currency (CBDC) presents “particular” security risks – not only to the issuer but to the users themselves, according to the Bank of Canada (BoC).

• In a new analytical note published Monday, the BoC said the users of a central bank token would have a tendency to “economize” on security, as they may not bear the full cost of any losses.
• The note raised the potential of users to lose the private keys to their addresses, or become victim to hacks or fraud through their own actions or bugs in the code of wallets, exchanges and other services.
• These issues are generally not due to the protocols behind digital currencies, which the BoC says are normally “extremely secure.”
• If the central bank sets up liability rules for losses similar to those for cash and bank accounts, CBDC users may be incentivized to comply with stricter security standards.
• Even so, it may be hard to enforce such rules as determining responsibility for losses of digital currencies can be “difficult,” according to the note.
• A solution proposed for further investigation by the BoC would be to limit users to storing their CBDC holdings only at “approved intermediaries.”
• Another challenge to a CBDC issuance raised in the note is that digital currencies are aggregated in anonymous addresses on a large scale, beyond what is possible with cash.
• This means there would be “trade-offs” between security and convenience that are not a factor in traditional banking, the central bank says.
• Further, competition between providers of third party solutions and the use of different security protocols brings the risk that they may not interact securely.
• The central bank therefore proposes that limiting user balances and enforcing security protocols on third-party providers could solve these potential problems.

Also read: CBDCs Could Challenge US Dollar’s Dominance: Deutsche Bank

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A growing number of economists and analysts – and even the Wall Street firm Goldman Sachs – have speculated this year that the U.S. dollar might be on the cusp of losing its status as the dominant reserve currency for central banks around the world. 

That possibility has helped to support this year’s 50% increase in prices for bitcoin, seen by many cryptocurrency investors as a hedge against a dollar devaluation. 

But CoinDesk’s Omkar Godbole reported Tuesday that, according to one prominent foreign-exchange analyst, the dollar’s value could decline significantly even if the U.S. currency keeps its majority share of global central-bank reserves for the foreseeable future. As of the most recent data, the percentage is around 60%. 

Related: Bitcoin’s Options Market Retains Long-Term Bull Bias Despite Sluggish Price

“Backing the dollar is the world’s biggest, deepest and the most transparent government bond market,” Marc Chandler, chief market strategist at Bannockburn Global Forex and author of the book “Making Sense of the Dollar,” told CoinDesk in a video chat on Wednesday. “I just don’t know how bitcoin can replace the greenback from that viewpoint.”

Read More: Bitcoin Unlikely to Replace US Dollar as Global Reserve: Marc Chandler

Bitcoin Watch

Bitcoin’s price bounce from Friday’s low of $10,380 looks to have stalled, and the cryptocurrency remains trapped in a contracting triangle or a narrowing price range. 

Such low-volatility price consolidations often end with a violent move on either side. 

Related: Bitcoin Unlikely to Replace US Dollar as Global Reserve: Marc Chandler

Some investors may be anticipating a range breakdown, given the weekly chart MACD histogram has crossed below zero, a sign of a bearish shift in momentum. 

The indicator, however, is based on backward-looking moving averages and lags prices. As such, its reliability is under question. 

Besides, broader sentiment in the options market is bullish, according to three- and six-month put-call skews, which measure the cost of puts relative to calls. 

Further,  on-chain data shows the market is currently witnessing a bigger influx of new investors than it did at the height of the bull market frenzy in late 2017. That is a major bullish sign, according to popular analyst Willy Woo. 

– Omkar Godbole

Read More: Bitcoin’s Options Market Retains Long-Term Bull Bias Despite Sluggish Price

Token Watch

Wrapped bitcoin (wBTC): Record $616M of wrapped bitcoin minted in September.

Ether (ETH): Futures contracts on BitMEX for Ethereum’s native token drop by halfin wake of U.S. regulators filing charges against Seychelles-based cryptocurrency exchange. 

What’s Hot

FCA finalizes ban on sale of crypto derivatives to UK retail consumers (CoinDesk) 

74-year-old software magnate-turned-crypto-bull John McAfee is arrested in Spain for alleged tax evasion (CoinDesk)

Binance cryptocurrency exchange abandons plan to form strategic alliance with Japanese trading platform TaoTao (CoinDesk)

US Senator Toomey highlights digital currency regulations as he eyes banking panel chairmanship (CoinDesk)

The central bank of Estonia, is undertaking a “multi-year” research project that will investigate the suitability of a blockchain-based digital currency (CoinDesk)

China’s digital-yuan pilot has racked up $162M of transactions (South China Morning Post)

Fidelity, Vanguard, Schwab funds have been loading up on crypto mining stocks (CoinDesk)

Central Bank of Oman warns that crypto assets are “fraught with high risks” (CoinDesk)

Analogs The latest on the economy and traditional finance

A report from legal services firm Epiq shows U.S. commercial bankruptcy filings are up 33% so far in 2020 up 78% from 2019 (Reuters)

Australia’s cash rate has been left at record lows by the country’s central bank amid further rumors it will bolster monetary easing (CNBC)

Asian stocks have risen to two week highs on news of U.S. Donald Trump’s ‘recovery’ from COVID-19 (Reuters)

Asian sales of ‘healthy’ alcoholic beverages is on the rise amid consumer behavioural changes in the face of COVID-19 (Nikkei Asian Review)

K-Shaped economy hides reality of 11M of U.S. jobs lost in pandemic recession, versus 8.7M in the post-Lehman Brothers recession of 2007-09 (WSJ)

Investors bet on Swiss franc’s appreciation despite central bank’s intervention to weaken the currency (WSJ)

Banks holding $2T+ of commercial real estate debt as economy shifts away from offices toward remote working, SEC report shows (SEC):

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Longer-term sentiment in bitcoin’s (BTC) options market remains bullish even as the the cryptocurrency struggles to claw its way back to $11,000.

• Bitcoin’s six-month put-call skew, which measures the cost of put options (bearish bets) expiring in six months relative to calls (bullish bets), is currently seen at close to -11%, according to data source Skew.
• In other words, demand for call options expiring in six months is outstripping demand for puts.
• The three-month skew is also leaning bullish at -5%.

• Since early September, skews for both these time frames have maintained a positive bias despite bitcoin’s decline from $12,476 to $10,000 and more recent consolidation.
• That consolidation is seeing bitcoin carve out a narrowing price range on the daily chart.

• Triangles or low-volatility price consolidations usually end with a violent move on either side.
• According to the three- and six-month skews, investors appear to be anticipating a breakout.
• Prominent analysts like Willy Woo have also suggested the path of least resistance is on the higher side, with on-chain data showing spiking influx of new investors into the bitcoin market.
• According to Bannockburn’s chief market strategist Marc Chandler, the U.S. dollar’s long-term trend is bearish. As such, bitcoin and other dollar-denominated assets are unlikely to see big sell-offs.
• Nevertheless, if the triangle pattern ends with a downside break, chart-driven selling may bring a re-test of September lows below $9,900.
• Further, some investors appear to be hedging for a temporary price drop, a suggested by the positive 6.6% reading on the one-month put-call skew.
• At press time, bitcoin is trading above $10,699, little changed since midnight UTC.

Also read: BitMEX Ether Futures Trading Contracts Fall by Half in Wake of US Charges

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At this year’s virtual Technology of the Future (ToF) conference, Johan Toll, Head of Digital Assets at Nasdaq, described how these new marketplaces are being created and the emerging market practices that are driving the rapid development.

The Financial Conduct Authority (FCA) has published final rules banning the sale of derivatives and exchange-traded notes (ETNs) that reference certain types of crypto assets to retail consumers.

The U.K. financial regulator said it considers these products to be ill-suited for retail consumers due to the harm they pose, asserting they cannot be reliably valued by retail consumers because of the: 

• Inherent nature of the underlying assets, which means they have no reliable basis for valuation
• Prevalence of market abuse and financial crime in the secondary market (e.g., cyber theft)
• Extreme volatility in crypto asset price movements
• Inadequate understanding of crypto assets by retail consumers
• Lack of legitimate investment need for retail consumers to invest in these products.

Specifically, the ban will affect “the sale, marketing and distribution” to retail investors of any derivatives contract or ETNs that linked to “unregulated transferable crypto assets” issued by entities in or outside the U.K.

Related: UK Watchdog Eyes Extension of Money Laundering Risk Reporting to Crypto Firms

The FCA classifies unregulated transferable crypto assets as “tokens that are not ‘specified investments’ or e-money, and can be traded.” The term incorporates major cryptocurrencies like bitcoin, ether and XRP. 

The U.K. ban will come into effect on Jan. 6, 2021.

“This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here,” said Sheldon Mills, interim executive director of Strategy & Competition at the FCA.

Mills said high price volatility and the difficulty of “reliably” valuing crypto assets brought high levels of risk for retail investors.

Related: Prime Factor Capital Is Shutting Down: Lack of Capital Cited as Prime Factor

“We have evidence of this happening on a significant scale,” he said “The ban provides an appropriate level of protection.”

The regulator suggested that retail consumers would save around £53 million from the ban on such derivative products.

The announcement comes as the latest setback for traders of crypto derivates, after the BitMEX exchange and its CEO Arthur Hayes were charged by U.S. authorities with allegedly facilitating unregistered trading and other violations.

The Commodity Futures Trading Commission said on Oct. 1 that the exchange had illegally provided U.S. traders with cryptocurrency derivatives trading, while the Department of Justice charged Hayes and others with violating the Bank Secrecy Act and conspiring to violate the act.

Also read: Europol Names Privacy Wallets, Coins, Open Marketplaces as ‘Top Threats’ in Internet Crime Report

The exchange’s parent firm HDR Global said it would fight the “heavy-handed decision to bring these charges.”

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The Financial Conduct Authority (FCA) has published final rules banning the sale of derivatives and exchange traded notes (ETNs) that reference certain types of crypto assets to retail consumers.

The U.K. financial regulator said it considers these products to be ill-suited for retail consumers due to the harm they pose, asserting they cannot be reliably valued by retail consumers because of the: 

• Inherent nature of the underlying assets, which means they have no reliable basis for valuation
• Prevalence of market abuse and financial crime in the secondary market (eg cyber theft)
• Extreme volatility in crypto asset price movements
• Inadequate understanding of crypto assets by retail consumers
• Lack of legitimate investment need for retail consumers to invest in these products.

Specifically, the ban will affect “the sale, marketing and distribution” to retail investors of any derivatives contract or ETNs that linked to “unregulated transferable cryptoassets” issued by entities in or outside the UK.

Related: UK Watchdog Eyes Extension of Money Laundering Risk Reporting to Crypto Firms

The FCA classifies unregulated transferable cryptoassets as “tokens that are not ‘specified investments’ or e-money, and can be traded.” The term incorporates major cryptocurrencies like bitcoin, ether and XRP. 

The U.K. ban will come into effect on Jan. 6, 2021

“This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here,” said Sheldon Mills, interim executive director of Strategy & Competition at the FCA.

Mills said that high price volatility and the difficulty of “reliably” valuing crypto assets brought high levels of risk for retail investors.

Related: Prime Factor Capital Is Shutting Down: Lack of Capital Cited as Prime Factor

“We have evidence of this happening on a significant scale,” he said “The ban provides an appropriate level of protection.”

The regulator suggested that retail consumers would save around £53 million from the ban on such derivative products.

The announcement comes as the latest setback for traders of crypto derivates, after the BitMEX exchange and its CEO Arthur Hayes were charged by U.S. authorities for allegedly facilitating unregistered trading and other violations.

The Commodity Futures Trading Commission said on Oct. 1 that the exchange had illegally provided U.S. traders with cryptocurrency derivatives trading, while the Department of Justice charged Hayes and others with violating the Bank Secrecy Act and conspiring to violate the act.

The exchange’s parent firm HDR Global said it would fight the “heavy-handed decision to bring these charges.”

Related Stories

• UK Court Orders Crypto Exchange to Shut Down After Clients Lose $2M
• UK Financial Watchdog Warns Crypto Firms to Register Before End of June

Blockchain payments firm Ripple has been only partially successful in its bid to have a class-action lawsuit over alleged securities fraud thrown out.

• In a court ruling filed last Friday, Judge Phyllis J. Hamilton of the U.S. District Court of Northern California granted with prejudice two parts of Ripple’s motion to dismiss the 10 claims against it and its CEO, Brad Garlinghouse.
• The accusations come as a consolidated action from a group of disgruntled investors who claim Ripple and Garlinghouse failed to register XRP as a security with the U.S. Securities and Exchange Commission and made misleading statements about the cryptocurrency.
• In the ruling, Judge Hamilton agreed that lead plaintiff Bradley Sostack had failed to support two claims relating to a series of allegedly fraudulent statements made by Ripple and Garlinghouse in 2017.
• As such, Ripple’s motion to dismiss the sixth claim over misleading XRP advertisements and a seventh alleging an illegal securities issuance.
• However, Judge Hamilton also denied other portions of Ripple’s motion to dismiss the lawsuit, which was amended at the end of February.
• These include a fourth claim relating to the allegation that Garlinghouse “misrepresented the status” of his XRP investment.
• At issue is the CEO’s claim to have been “very, very long XRP as a percentage of my personal balance sheet,” when in fact he had sold off millions of dollars in the cryptocurrency.
• However, Sostack may now proceed with four of the 10 claims only on the basis of Garlinhouse’s alleged misrepresentations pertaining to the “scope and character of his XRP holdings.”
• These claims include statements about banks utilizing XRP to source liquidity and an increase in the token’s demand based on its “value proposition.”

See also: Ripple Says XRP Lawsuit Based on ‘Unsupported Leaps of Logic’

See court document in full below:

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Bitcoin is unlikely to replace the greenback as a global reserve currency any time soon, according to one of the most highly regarded analysts in foreign exchange.

“Backing the dollar is the world’s biggest, deepest and the most transparent government bond market,” Marc Chandler, chief market strategist at Bannockburn Global Forex and author of the book “Making Sense of the Dollar,” told CoinDesk in a video chat on Wednesday. “I just don’t know how bitcoin can replace the greenback from that viewpoint.”

A global reserve currency is the one that facilitates cross-border trade, including investments and international debt obligations. Global central banks hold reserve currencies to help protect against major swings in foreign-exchange rates, as well as in the conduct of monetary policy.

Related: BitMEX Ether Futures Trading Contracts Fall by Half in Wake of US Charges

The U.S. dollar has been the primary reserve currency since 1944, and investors tend to park funds in dollar-denominated assets or hold dollars during times of stress in the global economy. For instance, the U.S. Dollar Index, which tracks the greenback’s value against a basket of other major fiat currencies, rose from 94.65 to 103.00 in mid-March as global equity markets tanked on coronavirus-induced recession fears. 

Some analysts, however, foresee markets losing confidence in the dollar over the next few years. That’s because the Federal Reserve has pumped trillions of dollars of liquidity into the financial system over the past decade and is likely to continue printing money at an elevated pace for some time. 

The central bank’s balance sheet has expanded from $905 million to over $7 trillion in the past nine years, according to the St. Louis Fed. It has grown by more than $4 trillion in the past five months, as the Fed rolled out emergency liquidity programs to counter the economic toll of the coronavirus, while ramping up monthly asset purchases in a process known as quantitative easing.

“The U.S. dollar is on the brink of losing its position of world’s global reserve as inflation concerns in the U.S. grows,” Goldman Sachs said in July. While the investment bank speculates that gold could replace the dollar, the crypto community contends that bitcoin, with its deflationary monetary policy, is the best alternative to the dollar. 

Related: Market Wrap: Bitcoin Gains Steadily to $10.7K; Ethereum Fees at 2-Month Low

Bitcoin’s pace of supply expansion is reduced by 50% every four years via a process called mining reward halving. At inception, each bitcoin block reward was worth 50 BTC. As of now, per block reward is 6.25 BTC – down from 12.5 BTC prior to May 12. Bitcoin’s tapering supply growth while the Fed has increased dollars is a large reason why many in the crypto markets have long been predicting the dollar’s collapse and bitcoin’s rise as a global reserve.

However, such predictions often neglect that countries do not just accumulate dollars but also buy U.S. government bonds. “Central banks don’t just hold dollars; they hold U.S. Treasuries. That’s what corporations and large institutions do,” Chandler said.

Why countries buy U.S. Treasury Bonds

As of June 2020, Japan held U.S. Treasury securities worth $1.26 trillion, and China held $1.07 trillion, according to data provider Statista. According to the Federal Reserve and U.S. Department of the Treasury, foreign countries held $7.04 trillion worth of U.S. Treasury securities as of June 2020.

The Chinese and Japanese purchases of Treasury bonds isn’t a case of these nations’ generosity, as is popularly perceived, but economic math. These nations run substantial current account surpluses (and capital account deficits) and invest their surplus forex reserves in the U.S. government bonds, given it is the deepest in the world. Also, investing in the U.S. Treasury helps Japan and China keep their currencies from appreciating and preserves current account surpluses. 

As of Aug. 20, the size of the global sovereigns, supranational and agencies bond market was $87.5 trillion, of which the U.S. accounted for $22.4 trillion and China $19.8 trillion. While China is a close second, its currency, the yuan, has yet to achieve full capital account convertibility and there are transparency concerns regarding Chinese markets. 

Put simply, no other bond market has the depth and transparency to absorb billions of dollars of demand other than the U.S. bond market. “No bond market can come close to Treasurys,” Chandler said.

Meanwhile, no central bank has purchased bitcoin to date. While the institutional participation has increased this year, the cryptocurrency continues to behave like an investment asset rather than a safe haven or a future global reserve. Bitcoin fell during the March crash and has risen strongly over the past six months alongside the U.S dollar’s sell-off. 

Besides, price volatility is an issue. Bitcoin has moved at an average pace of 16% per month this year, substantially higher than a non-major currency like the Mexican peso, as noted by Chandler. 

As such, the idea of bitcoin supplanting the U.S. dollar as the global reserve in the near term looks far-fetched. 

Dollar has withered a bigger sell-off in the past

The U.S. Dollar Index (DXY) fell by 10% to a 16-month low of 101.75 in the mid-March to mid-August period. The slide, coupled with the Federal Reserve’s recent decision to adopt a more flexible approach to controlling inflation, has bolstered fears of the dollar’s collapse as a reserved currency. 

However, the dollar has suffered bigger sell-offs in the past and still maintained its reserve status. For instance, the index, which rose sharply from 77 to 89 in the seven months following the collapse of Lehman Brothers in August 2008, reversed gains and fell back to 72.70 by May 2011. That’s a nearly 20% decline in 12 months or so.

More important, when the DXY made a low near 72.70 in May 2011, EUR/USD was trading near $1.45, up 23% from the current rate of $1.1750. Meanwhile, GBP/USD was trading above $1.65 – 28% more than the current exchange rate of $1.29. The Japanese yen, Australian dollar, Canadian dollar and other major currencies were also trading at significantly higher levels than seen today, as noted by Chandler. 

Essentially, the U.S. dollar was aggressively sold on the Federal Reserve’s quantitative easing programs. Even so, it remained the dominant global reserve currency. 

The dollar accounted for more than 60% of the global forex reserves in crisis and recovery years of 2009, 2010 and 2011, according to data source statista.com. The situation hasn’t changed much this year despite the coronavirus crisis. The greenback accounted for 61% of the global currency reserves in the second quarter, as per the International Monetary Fund.  

Thus replacing the dollar is easier said than done. Bitcoin has to cover plenty of distance before it can threaten the dollar’s hegemony. For that to happen, the crypto community’s focus needs to shift from playing for price rallies to building infrastructure that would accelerate adoption at the institutional level. 

Major central banks like the Fed and the People’s Bank of China are working on digital currencies. Chandler postulates that central bank digital currencies would pave the way for an alternative payment system. 

Dollar sell-off likely to continue

The dollar bounced in September, ending a six-month losing trend even though the Fed adopted a more flexible approach to controlling inflation at the end of August. 

According to Chandler, the dollar’s bounce has got more to do with technical factors. The currency looked oversold against majors and bullish positioning in EUR/USD had reached extremes in August. As a result, a minor bounce was overdue and was amplified by expectations for more monetary easing by the European Central Bank. 

The Fed has created more room for itself to keep interest rates low for a longer period of time by signaling a willingness to tolerate above-target (2%) inflation for some time. As such, the path of least resistance for the dollar is to the downside, unless other central banks follow the Fed’s path. 

With the dollar looking weaker, recent uptrends in bitcoin, gold and assets denominated in the greenback could soon resume. However, if Chandler is correct, the dollar is likely to prevail as the global reserve.

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The Central Bank of Oman (CBO) has warned citizens and residents of the “high risks” of using cryptocurrencies in a statement issued through the Oman News Agency.

• The CBO said crypto assets are “are fraught with high risks due to the fluctuation of their value significantly and the risks of being used for electronic piracy and fraud.”
• The warning, reported by the Times of Oman Tuesday, specifically highlighted the risks of investing in Dagcoin, a cryptocurrency that the BBC recently said in a podcast has seen an influx of promoters from accused Ponzi scheme OneCoin.
• Jordan’s central bank issued a similar warning mentioning Dagcoin last year.
• The Oman central bank further clarified that it has not issued any licenses for the trading of cryptocurrencies and that cryptocurrencies are not guaranteed in the Gulf state as money.
• “Anyone who deals in these cryptocurrencies, … does so on his own responsibility,” reads the statement.

Also read: OneCoin Investors Allege BNY Mellon Aided $4B Fraud

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A prominent Taiwanese-American multimedia artist considered a pioneer of internet-based art is releasing her first work on a blockchain-based platform.

• Shu Lea Cheang is a renowned artist whose works have been exhibited at the Walker Art Center in Minneapolis, the Guggenheim Museum in New York City and the Palais de Tokyo in Paris.
• The artist, whose works are also collected by the Museum of Modern Art, Whitney Museum and the Guggenheim, among others, explores social issues such as race relations and gender roles in her art.
• Cheang will premier her new media artwork on MakersPlace, an Ethereum blockchain-powered market for rare and collectible digital art, later this week.
• Having an artist such as Cheang joining the crypto art space, “speaks volumes” to the growth and maturity of rare digital art, Makersplace CEO and co-founder Dannie Chu told CoinDesk.
• For her new work to feature on the platform, Cheang has created a sci-fi video series called BioNet, consisting of two artworks “BioNet Baby” and “BioNet Blood Cell,” examining the potential impact of technology and science as it relates to human society.
• The media artwork will be made available on Oct. 8 beginning at 20:00 UTC and will be digitally stamped with an indelible signature from Cheang authenticated and secured through MakersPlace platform.

See also: ‘Wonder Woman’ Illustrator Jose Delbo to Release Comic Book on the Blockchain

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• John McAfee Arrested in Spain on US Criminal Charges
• First Mover: Day in the Life of a Yield Farmer Means Part-Time Gig, Full-Time Risk
• OFAC Warns That Firms Helping Victims With Ransomware Payouts Risk Violating Its Rules

Global virtual asset exchange Binance and Japanese crypto trading platform TaoTao did not reach an agreement on a strategic alliance to launch a joint venture in Japan. 

• TaoTao announced Monday that negotiations between the two parties to create a crypto trading platform dedicated to Japanese users have ended without agreement and the alliance was abandoned, CoinDesk Japan reported.
• Binance entered into discussions with Japan’s Z Corporation (a subsidiary of Z Holdings, which owns Yahoo Japan) and its affiliate local crypto trading platform TaoTao in January 2020 with the goal of incorporating Binance’s trading technology and operational know-how to expand its domestic business. 
• It is unclear why the attempted partnership fell through.
• In 2018, Japan’s financial watchdog FSA warned Binance against operating without a license, and earlier this year, the firm announced it will phase out services to customers residing in Japan. 
• Last month, Japanese crypto exchange Fisco (previously Zaif) which suffered a $60 million hack in 2018, filed suit against Binance alleging it knowingly allowed stolen funds to be laundered through its exchange.

Related Stories

• Binance, Gemini, Kraken So Far the Winners From BitMEX’s Legal Woes
• First Mover: Binance CEO Sees Future in DeFi While Bitcoin Volatility Turns Minuscule
• Binance CEO Says He Fully Expects DeFi to Cannibalize His Crypto Exchange
• Russian Web Censor Tells Binance It’s Been Blacklisted – Three Months Late

Investor interest in ether futures traded on BitMEX has declined sharply since the Seychelles-based cryptocurrency exchange was charged Thursday with illegally operating an unregistered derivatives-trading platform that accepted U.S. customers.

• At press time, ether futures contracts worth $63 million (179,000 ETH) are open or active on BitMEX, the lowest since May 15, according to data source Skew.
• Open interest is down nearly 50% from the $125 million observed on Oct. 1.
• Last week, the U.S. Commodity Futures Trading Commission (CFTC) filed civil charges against BitMEX, and the Department of Justice brought criminal charges against BitMEX’s owners for facilitating money laundering and other illegal transactions.

• Open interest in ether futures on BitMEX was declining even before last week’s charges, in line with a downdraft witnessed across the industry. It had peaked at $214 million on Sept. 1.
• September’s 17% decline in ether’s price likely dented short-term optimism, causing a slide in the open interest across all exchanges.
• Notably, since Thursday, open positions in BitMEX bitcoin futures have also declined by over 20% from $592 million to $456 million. 

Also read: Open Interest in CME Bitcoin Futures Slides as Market Sapped by Surging DeFi

Related Stories

• Market Wrap: Bitcoin Gains Steadily to $10.7K; Ethereum Fees at 2-Month Low
• Open Interest in CME Bitcoin Futures Slides as Market Sapped by Surging DeFi
• Crypto Long & Short: Coinbase’s ‘Apolitical’ Stance Isn’t Nearly as Simple as It Sounds
• Bitcoin Volatility Hits 23-Month Low as the Cryptocurrency Shrugs Off BitMEX, Trump’s Illness

Investor interest in ether futures traded on BitMEX has declined sharply since the Seychelles-based cryptocurrency exchange was charged Thursday with illegally operating an unregistered derivatives-trading platform that accepted U.S. customers.

• At press time, ether futures contracts worth $63 million (179,000 ETH) are open or active on BitMEX, the lowest since May 15, according to data source Skew.
• Open interest is down nearly 50% from the $125 million observed on Oct. 1.
• Last week, the U.S. Commodity Futures Trading Commission (CFTC) filed civil charges against BitMEX, and the Department of Justice brought criminal charges against BitMEX’s owners for facilitating money laundering and other illegal transactions.

• Open interest in ether futures on BitMEX was declining even before last week’s charges, in line with a downdraft witnessed across the industry. It had peaked at $214 million on Sept. 1.
• September’s 17% decline in ether’s price likely dented short-term optimism, causing a slide in the open interest across all exchanges.
• Notably, since Thursday, open positions in BitMEX bitcoin futures have also declined by over 20% from $592 million to $456 million. 

Also read: Open Interest in CME Bitcoin Futures Slides as Market Sapped by Surging DeFi

Related Stories

• Market Wrap: Bitcoin Gains Steadily to $10.7K; Ethereum Fees at 2-Month Low
• Open Interest in CME Bitcoin Futures Slides as Market Sapped by Surging DeFi
• Crypto Long & Short: Coinbase’s ‘Apolitical’ Stance Isn’t Nearly as Simple as It Sounds
• Bitcoin Volatility Hits 23-Month Low as the Cryptocurrency Shrugs Off BitMEX, Trump’s Illness

CoinDesk is preparing for invest: ethereum economy with a special series of newsletters focused on Ethereum’s past, present and future. Every day until the event, the team behind Blockchain Bites will dive into an aspect of Ethereum that excites or confuses them.

The Top Shelf news you subscribed to is down below. 

Now a few words from CoinDesk’s Managing Director of Events Aaron Stanley:

Making consensus

Related: First Mover: Day in the Life of a Yield Farmer Means Part-Time Gig, Full-Time Risk

The meaning of development
The exploding popularity of decentralized finance, be it “Weird DeFi” or otherwise, has brought a surge of new interest to Ethereum-based applications while highlighting the scalability issues with the platform’s current infrastructure. 

Network congestion, a result of increased usage and more complex smart contracts being run on the platform, has helped to create an intense FOMO within the ecosystem while simultaneously erecting an enormous barrier to entry in the form of gas fees for non-power users and whales. 

This isn’t exactly a new problem for Ethereum. This same scalability argument has reared its head plenty of times before (see December 2017 and CryptoKitties), prompting a plethora of “Eth Killer” chains to sprout up in 2018-19 with the goal of beating Ethereum at its own game. 

Those chains haven’t been much of a threat to Ethereum’s volume, but this time the heat is on. Competing smart contract platforms like Polkadot, Cosmos, Solana and Near are queued up to welcome traders and application builders who have grown tired of waiting for an Ethereum scaling solution to emerge. 

Related: Crypto Long & Short: Coinbase’s ‘Apolitical’ Stance Isn’t Nearly as Simple as It Sounds

Amid the craze of vegetable tokens, meme coins, skyrocketing gas fees and all the other crazy DeFi stuff we witnessed in recent months emerged encouraging news about Ethereum 2.0 – the impending transition to proof-of-stake and implementation of sharding. It’s in the final stages of testing and is poised to launch its Phase 0 sometime this fall. 

This migration holds significant impacts for the Ethereum-native DeFi economy and the “Money Legos” that have powered it. A fully scaled blockchain could pave the way for that elusive mass adoption that crypto people talk about so much. 

But then again, Ethereans have been waiting since 2015 for this transition to take place, and to many it’s simply a fantasy. The full roadmap for Eth 2.0 implementation is years long, and skeptics will find plenty of reasons to cast doubt on the likelihood of its completion. 

So what do traders, investors and DeFiers need to know about this transition and how it will affect their bags? This Eth 2.0 migration and its second and third-order implications are the focus of CoinDesk’s upcoming virtual event invest: ethereum economy on Oct. 14, where we’ll be tackling all of these questions surrounding what could well be the most important news development in crypto this year. 

– Aaron Stanley 

At stake

Seeing success
Camila Russo is the founder of The Defiant and author of “The Infinite Machine,” the first book on the history of Ethereum. Here she examines how Ethereum went from concept to a functioning system and economy over the past half decade. 

This excerpted post was originally published in July.

Almost five years ago, on July 30, 2015, part of the Ethereum team had gathered in Berlin to see the network they helped build go live. A big screen overhanging their worktables served as the countdown clock for when the test network reached block 1,028,201. That’s the palindrome and prime number they picked as the key which would launch the mainnet. Others were waiting for the launch in Ethereum hubs in Amsterdam, Toronto, New York and Zug, Switzerland. 

It was the culmination of months of work, where core developers did the heavy lifting on the technical side, but which also included designers, marketers, and community managers. Ethereans knew a distributed network with no community would fail. 

Early Ethereum team members had also spent endless hours with lawyers leading up to the ether sale, some co-founders had gone through bitter fights, while many others had ravaged their savings working with no salaries towards one goal: Making the vision Vitalik Buterin laid out on a white paper in November 2013 a reality.  

It’s happening

When the test network hit the predetermined block at 4:26 p.m. in Berlin, a meme of Ron Paul, jubilant, with his arms up and surrounded in green laser beams and white block letters that read IT’S HAPPENING, popped up on the monitor. The Ethereum team opened a bottle of champagne while rocket emojis filled chat rooms.

The Ethereum network quickly left other blockchain upstarts behind and has since grown to become the second-largest cryptocurrency after bitcoin, with ether’s market capitalization (as of writing) at just shy of $40 billion. 

Minecraft of crypto-finance

But a better measure of success is to examine whether Ethereum builders achieved what they set out to do. Ethereum aims to be a “fully-fledged, Turing-complete (but heavily fee-regulated) cryptographic ledger,” which allows developers to build any application they can dream of on top, Vitalik wrote in the white paper, which inspired early team members to drop everything and join him in building it. 

“Rather than being limited to a specific set of transaction types, users will be able to use Ethereum as a sort of ‘Minecraft of crypto-finance’ – that is to say, one will be able to implement any feature that one desires simply by coding it in the protocol’s internal scripting language,” he wrote. Minecraft is a sandbox-style video game, which gives players flexibility to explore and build whatever they want in the game’s virtual world. 

Vitalik, who was 19 years old at the time, listed on the Ethereum white paper the applications he envisioned could be built on top of this generalized platform: 

Sub-currencies “representing assets such as USD or gold to company stocks and even currencies with only one unit issued to represent collectibles or smart property.”

Financial derivatives, such as “hedging contracts.” He notes that “financial contracts of any form do need to be fully collateralized; the Ethereum network controls no enforcement agency and cannot collect debt.”

Identity and reputation systems where “users can register their names in a public database alongside other data,” for example, for domain-name systems.

Decentralized Autonomous Organizations, which replicate traditional companies but use blockchain technology for enforcement. The entity would have shareholders who collect dividends and decide how the corporation automatically allocates its funds, “using either bounties, salaries or even more exotic mechanisms such as an internal currency to reward work.” 

Also listed were crop and generic insurance, decentralized data feeds, gambling and prediction markets, a full-scale on-chain stock market and an on-chain decentralized marketplace.

Five years later, all of the use cases envisioned by Vitalik have become a reality, though some with more success than others.

A good problem to have

The question isn’t whether there’s demand for Ethereum, but whether the network will continue developing fast enough to meet that demand. The wait for ETH 2.0, which would allow Ethereum to scale, has been a constant in Ethereum’s history. A barebones proof-of-stake chain, which was slated to launch early this year, has been delayed and now it’s unclear whether it will launch this year at all. 

The next five years will be about strengthening these scaling solutions and making these financial applications more robust and secure. It will also be necessary to create better crypto onramps and building apps in the less developed areas of Ethereum, like identity and insurance. The result will be this Minecraft of finance stops being an insiders’ secret and more players can join.

– Cami Russo

Ethereum 101

So what is Ethereum and how does it work? CoinDesk contributor Alyssa Hertig explains what “the world computer” is looking to achieve.

The ‘World Computer’
Before you can understand Ethereum, it helps to first understand the internet.

Today, our personal data, passwords and financial information are all largely stored on other people’s computers – in clouds and servers owned by companies like Amazon, Facebook or Google. Even this CoinDesk article is stored on a server controlled by a company that charges to hold this data should it be called upon.

With this convenience, there is also vulnerability. As we’ve learned, a hacker or a government can gain unwelcome access to your files without your knowledge, by influencing or attacking a third-party service – meaning they can steal, leak or change important information.

While Bitcoin aims to disrupt PayPal and online banking, Ethereum has the goal of using a blockchain to replace internet third parties – those that store data, transfer mortgages and keep track of complex financial instruments.

In short, Ethereum wants to be a ‘World Computer’ that would decentralize – and some would argue, democratize – the existing client-server model.

With Ethereum, servers and clouds are replaced by thousands of so-called “nodes” run by volunteers from across the globe (thus forming a “world computer”).

The vision is Ethereum would enable this same functionality to people anywhere around the world, enabling them to compete to offer services on top of this infrastructure.

– Alyssa Hertig

Top shelf

Employees walk
Coinbase employees are beginning to take severance packages, CoinDesk’s Nathan DiCamillo reports. Days after the corporate exchange giant offered non-aligned employees an exit from the exchange’s “apolitical” mission, at least three employees have decided to walk. Coinbase has been the center of a media storm since its CEO Brian Armstrong published a blog post discouraging politics in the office. At least one of the employees said Armstrong could have avoided controversy if he had communicated the company’s new direction only internally. 

Crypto for Congress
The Chamber of Digital Commerce’s Political Action Committee (PAC) is contributing $50 worth of bitcoin to each congressional campaign. According to the group’s founder, Perianne Boring, this is an attempt to raise awareness and give incumbents a chance to interact with blockchain technology and digital assets. In addition to the contribution, the Chamber’s PAC will also provide online training and a toolkit to help members of Congress engage with cryptocurrencies. According to the group, once informed about the contribution, the campaign can either accept it, pass it on to a charity that accepts bitcoin (BTC) or just opt out. 

CBDC test
Eesti Pank, the central bank of Estonia, is undertaking a “multi-year” research project that will investigate the suitability of a blockchain-based digital currency to work alongside cash. The hypothetical CBDC will run on KSI Blockchain, already “a core” part of the infrastructure of Estonia’s e-government system. Guardtime, a corporate developer of KSI, and The SW7 Group, a business development and investment firm will assist the study. Estonia’s experience running a digital form of government “gives us good grounds for launching a project to explore the technological frontiers of digital money,” said Rainer Olt, head of the central bank’s Payment and Settlement Systems Department.

Hackers found?
KuCoin CEO Johnny Lyu tweeted Saturday the South Korean crypto exchange has found what he described as the “suspects” of last month’s $281 million hack. “After a thorough investigation, we have found the suspects of the 9.26 #KuCoin Security Incident with substantial proof at hand,” Lyu said in the tweet. “Law enforcement officials and police are officially involved to take action.” In addition, Lyu said another $64 million of stolen assets have been recovered from “suspicious addresses,” bringing the total value of recovered assets to $204 million since Oct. 1.

Tokenized ETF
Securities and Exchange Commission (SEC) Chairman Jay Clayton said the regulatory body is open to the idea of a tokenized exchange-traded fund (ETF). “We’re willing to try that. Our door is wide open,” the report quoted Clayton as saying in a webinar yesterday with the Chamber of Digital Commerce. While Clayton’s statements expressed a willingness to explore the idea of tokenized stocks, the report also noted recent actions by the regulatory body that would seem to indicate the day those ideas becoming reality is still a ways off.

Quick bites

• Italian Payments Giants Merging to Form Entity That Will Dominate Local Market (Dan Palmer/CoinDesk)
• The Web Wasn’t Built for Privacy – But It Could Be (Ben Powers/CoinDesk)
• Coinbase’s ‘Apolitical’ Stance Isn’t Nearly as Simple as It Sounds (Noelle Acheson/CoinDesk)
• How Bitcoin, Ethereum and other technologies could point the way to new systems of governance (Bruno Maçães/City Journal)
• Every Credit Card a Tribe, Every Crypto Coin a Scaling Debate (Brady Dale/CoinDesk)

Who won #CryptoTwitter? Related Stories

• Money Reimagined: Trump, Crypto and Fairer Taxes
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Popular privacy-enhancing cryptocurrency wallets and other technologies were named as “top threats” in Europol’s 2020 Internet Organized Crime Threat Assessment published Monday and reviewed by CoinDesk.

• According a report by the European Union’s law enforcement agency, “privacy-enhanced wallet services using coinjoin concepts (for example Wasabi and Samurai wallets) have emerged as a top threat in addition to well established centralised mixers.”
• These statements echo comments made in June by the agency, as CoinDesk reported.
• Actors labeled as threats in the report have also been “increasingly using hardware wallets” to securely store funds and private keys.
• Europol’s report also included decentralized marketplace protocols as a “high priority threat”, specifically naming OpenBazaar, developed by cryptocurrency software company OB1, noting “thousands of downloads on Android” for the company’s mobile platform Haven.
• “Criminals have started to use other privacy-focused, decentralised marketplace platforms, such as OpenBazaar and Particl.io to sell their illegal goods,” the report says.
• OB1 CEO Brian Hoffman told CoinDesk that his company “only bundle[s] the OB1 search engine” for OpenBazaar, and markets on their Haven product are actively filtered to remove listings that don’t comply with law enforcement and app store requirements.
• The OpenBazaar protocol itself, however, “can be used by anyone, and there is no middleman to remove listings before being published,” he added.
• In terms of payment options, bitcoin remains the Darkweb’s most popular method, the report says, “mainly due to its wide adoption, reputation, and ease of use.” But “monero is gradually becoming the most established privacy coin for Darkweb transactions, followed by zcash and dash.”
• “These privacy coins may present a considerable obstacle to law enforcement investigations,” according to Europol’s report.

Related Stories

• Market Wrap: Bitcoin Gains Steadily to $10.7K; Ethereum Fees at 2-Month Low
• Market Wrap: Blame BitMEX as Bitcoin Dumps to $10.4K; Record Month for Ethereum Fees
• Market Wrap: Bitcoin Holds at $10.7K; Uniswap Volume Drops
• Regulated US Exchange Gemini Now Offers Confidential Zcash Withdrawals

Bitcoin’s price is steadily increasing after last week’s bad news dump; while Ethereum’s fees fall.

• Bitcoin (BTC) trading around $10,734 as of 20:15 UTC (4:15 p.m. ET). Gaining 0.51% over the previous 24 hours.
• Bitcoin’s 24-hour range: $10,621-$10,775
• BTC above its 10-day and 50-day moving averages, a bullish signal for market technicians.

Bitcoin’s price has been on a steady rise since Saturday, topping out at $10,775 Monday on spot exchanges such as Coinbase. Cindy Leow, portfolio manager for 256 Capital Partners, a multi-strategy trading firm, notes bitcoin’s capacity to rebound from recent unpleasant news. “Bitcoin has quickly recovered from back-to-back news about the [Commodity Futures Trading Commission] and the Department of Justice’s indictment against BitMEX as well as news of [Pres. Donald] Trump contracting COVID, speaking to its short-term resilience.” 

Read More: Bitcoin Volatility Hits 23-Month Low and Shrugs Off BitMEX, Trump’s Illness

Related: Europol Names Privacy Wallets, Coins, Open Marketplaces as ‘Top Threats’ in Internet Crime Report

Despite bitcoin’s bounceback, Constantin Kogan, partner at crypto fund-of-funds BitBull Capital, is concerned as the derivatives market indicates many traders are still sitting out. “Bitcoin has been stuck in a $10,000-$11,000 channel for the last month,” he said. “Lending yields have fallen across the board as investors await the return of volatility and measure the potential impacts of BitMEX’s stunning downfall.” 

A sign of distress can be seen by comparing bitcoin’s funding rates with those of competitors. Funding rates are fees paid by one side of a futures contract to the other. When they’re positive, it usually reflects bullish sentiment, while negative rates are bearish.

But BitMEX’s negative funding rate might be a sign that investors are leaving the venue, according to Vishal Shah, an options trader and founder of derivatives exchange Alpha5.

BitMEX’s funding rate is currently around  -0.0124%, while funding rates for major competitors have been at or close to zero for the past three days.  

Related: First Mover: Day in the Life of a Yield Farmer Means Part-Time Gig, Full-Time Risk

“It’s a function of unwinds,” Shah said. “Long positions are coming unwound to an extent, open interest has fallen materially, as expected.”

“This makes BitMEX a relatively cheaper venue for BTC-denominated players to gain topside leverage,” Shah said. “But that discount isn’t material; you’d have to justify the risk for a 5-10% annualized gain given the regulatory overhang.” 

While many investors are justifiably losing interest in BitMEX due to its looming legal issues, bitcoin’s dominance, its market share in relation to the total crypto capitalization, has been bouncing back from 2020 lows in September.

Dominance starting to trend upwards could affect price, especially if there is sell pressure on both bitcoin and altcoins, said 256 Capital’s Leow. “While this may seem bullish for BTC, it is also a cautionary signal: When low-cap alts dump while BTC stays flat, BTC tends to follow suit in the short-term.”

Daily Ethereum fees drop

The second-largest cryptocurrency by market capitalization, ether (ETH), was down Monday trading around $351 and slipping 0.37% in 24 hours as of 20:15 UTC (4:15 p.m. ET). 

Read More: CME Bitcoin Futures Open Interest Slides as Market Sapped by Surging DeFi

Fees on Ethereum totalled 5,560 ETH Saturday, the lowest amount spent on the network since August 8. Used to conduct transactions and interact with smart contracts that constitute decentralized finance or DeFi, Ethereum fees have been hitting all-time highs as of late. On Sept. 17, for example, a record 42,763 ETH in fees were paid to miners.

Jean-Marc Bonnefous, managing partner of Tellurian Capital, an investment firm, doesn’t expect Ethereum fees, also known as gas, to stay low. “I suspect this is a temporary lull only as the structural issue of the gas costs has not gone away,” he said. Traders could take advantage of the respite in fees to rebalance, Bonnefous noted. “It may be a good time to readjust portfolios at a cheaper cost.”

Other markets

Digital assets on the CoinDesk 20 are mostly green Monday. Notable winners as of 20:15 UTC (4:15 p.m. ET):

• monero (XMR) + 2.8%
• zcash (ZEC) + 2.5%
• chainlink (LINK) + 1.8%

Notable losers as of 20:15 UTC (4:15 p.m. ET):

• litecoin (LTC) – 1.5%
• ethereum classic (ETC) – 1%
• eos (EOS) – 0.58%

Read More: KuCoin CEO Says Suspects in $281M Hack Identified

Equities:

• Asia’s Nikkei 225 closed in the green 1.2%, led higher by gains in the transportation and financial sectors. 
• Europe’s FTSE 100 ended the day climbing 0.69% as investors were cautiously optimistic on U.S. President Trump’s coronavirus condition.
• In the United States the S&P 500 gained 1.7% as the news President Trump will leave the hospital Monday boosted investor optimism.

Commodities:

• Oil is up 6.3%. Price per barrel of West Texas Intermediate crude: $39.35.
• Gold was in the green 0.78% and at $1,913 as of press time.

Treasurys:

• U.S. Treasury bond yields climbed Monday. Yields, which move in the opposite direction as price, were up most on the two-year, jumping to 0.149 and in the green 11.8%.

Related Stories

• Open Interest in CME Bitcoin Futures Slides as Market Sapped by Surging DeFi
• Market Wrap: Bitcoin Rebounds to $10.5K; Stablecoin Market Cap ‘Goes Parabolic’

John McAfee, the 74-year-old software magnate-turned-crypto-bull, has been arrested in Spain on allegations of tax evasion, according to the Department of Justice. His extradition to the U.S. is pending.

• On Monday DOJ prosecutors unsealed a criminal indictment against McAfee, who faces charges of tax evasion and willful failure to file tax returns that could land him behind bars for over five years if convicted.
• The announcement comes the same day that U.S. Securities and Exchange Commission (SEC) sued McAfee for allegedly pumping initial coin offerings (ICOs) without disclosing he was being paid to do so.
• McAfee allegedly received BTC and ETH worth more than $11.6 million for promoting seven ICOs in 2017 and 2018.
• He also allegedly received $11.5 million in the promoted tokens. The SEC does not name the projects in the suit.
• The SEC outlined the securities violations in a 55-page complaint filed Monday in the U.S. District Court for the Southern District of New York.
• According to the SEC, McAfee raised a total of $23.2 million from projects which raised a cumulative $41 million.
• “McAfee’s extravagant posts (such as tweeting predictions about BTC price increases and promising to ‘eat my d**k on national television’ if such predictions did not pan out) … generated an enormous amount of publicity,” the SEC said in its complaint.
• The SEC is seeking civil penalties and an order prohibiting McAfee from serving as a public officer again in future.
• The SEC also sued McAfee’s personal security guard, Jimmy Gale Watson, in the complaint.

Related Stories

• OFAC Warns That Firms Helping Victims With Ransomware Payouts Risk Violating Its Rules
• Estonia’s Central Bank to Research if Blockchain Can Support a Digital Euro
• Italian Payments Giants Merging to Form Entity That Will Dominate Local Market
• KuCoin CEO Says Suspects in $281M Hack Identified; Authorities on the Case

Wrapped Bitcoin minted a record $616 million worth of tokenized bitcoins in September, according to transaction data analyzed by CoinDesk, a more than 160% increase over the $232 million minted in August.

• Record minting comes as strong over-the-counter demand for wrapped bitcoin continues, according to Chicago-based firm Grapefruit Trading, one of the first OTC desks to mint WBTC through BitGo.
• Getty Hill, trader at Grapefruit, told CoinDesk their clients’ interest in converting BTC to WBTC reflects market participants capitalizing on the growing number of opportunities for using pseudo-BTC in the growing decentralized finance (DeFi) ecosystem.

• At FTX, CEO Sam Bankman-Fried told CoinDesk OTC demand for WBTC is also significant, even if it’s not at the same level as during the height of the DeFi craze over the past few months.
• Even if it cools off a bit in the coming months, he expects client demand for tokenized bitcoin to “sustain itself at a way higher level than before.”
• Alameda Research has been the leading wrapped bitcoin merchant for the past two months due to over-the-counter demand at its sister company, FTX. In August, Alameda minted $160 million worth of WBTC followed by $306 million minted in September.
• September’s growth also benefited from the activity of some large merchants who minted no WBTC the month before.

• Beyond WBTC, the supply of all forms of tokenized bitcoins grew 120% in September, according to data from Dune Analytics, to over 121,000 BTC, up from nearly 55,000 BTC in August, as growth among smaller BTC tokenization projects continues.
• Clients have inquired about renBTC, tBTC, and others, Hill told CoinDesk. But volume has been “100% in WBTC.”
• Some OTC desks like FTX offer alternate tokenized bitcoin products, like renBTC, in addition to wrapped bitcoin. But wrapped bitcoin represents over 73% of the tokenized bitcoin market, and, not surprisingly, the “vast majority” of OTC clients want wrapped bitcoin, Bankman-Fried told CoinDesk.
• The value of all BTC tokenized through Wrapped Bitcoin passed $1 billion at last check, according to OnChainFX.

Related Stories

• Record WBTC Mint Completed by Three Arrows Capital as Demand for Bitcoin on Ethereum Continues to Grow
• BitGo Is Bringing DeFi-Friendly Wrapped Bitcoin to the Tron Blockchain
• Supply of Tokenized Bitcoin on Ethereum Now Tops $1.1B: Here’s Why
• Bitcoin Supply on Ethereum Tops $1B

Three of the largest asset managers are diversifying their funds to hold blockchain stocks, throwing more establishment financial might behind bitcoin’s technology.

Charles Schwab has begun purchasing shares of Riot Blockchain, joining Fidelity and Vanguard – already investors in Riot, HIVE Blockchain Technologies, Hut 8 and BC Group – in allocating mutual fund holdings to a cryptocurrency company, according to financial filings with the U.S. Securities and Exchange Commission.

The stock purchases also double down on the mutual fund managers’ equity investments and experiments in the space. Schwab this summer invested in Alchemy, an ethereum application platform, while Vanguard has been piloting Symbiont’s blockchain for foreign exchange transactions, and Fidelity has a digital assets arm – set to launch a trading service and a bitcoin index fund – and has backed Coin Metrics, Fireblocks and Everledger.

Related: DeFi Has a Front-Running Problem. Sparkpool’s Potential Fix Is Launching This Month

Filings for the first half of this year show that Charles Schwab Investment Management, Inc. purchased 22,977 Riot shares for $52,000. Two Vanguard funds – the Vanguard Index Fund and Vanguard Valley Forge Index Fund – were invested in 954,229 Riot shares worth $2,118,000, and two Fidelity funds were separately invested in 176,242 Riot shares worth $230,115 (split between a NASDAQ index and three market indices) and 2,769,759 HIVE shares worth $1,003,163.

Riot Blockchain, based in the U.S., and HIVE Blockchain Technologies, based in Canada, provide services for mining bitcoin, a process where new cryptocurrency is minted.

Outside the U.S., a third Fidelity fund – Fidelity International – first acquired this year 10,451,094 shares valued at $1.80 each of Hut 8, a Canadian bitcoin mining company, and 17 million shares priced at HK$6.50 (US$8.30) of BC Group, a Hong Kong-based digital asset platform, earlier filings indicate.

The Riot shares in the two Vanguard funds and a third Vanguard fund – the Vanguard Institutional Index Fund – are back up from the last three years, which ended with them holding a combined 269,610 shares for $7,912,000 in 2017, 187,049 shares for $282,000 in 2018 and 826,391 shares for $925,000 in 2019.

Related: Record $166M Ethereum Fees Last Month Were 6 Times Bigger Than Bitcoin’s

Holdings also ticked up again for the Fidelity fund invested in Riot – the Fidelity Concord Street Trust – which bought 188,277 shares for $1,185,607 ending in 2018 and 159,263 shares for $270,375 ending in 2019. They dipped for the Fidelity Securities Fund invested in HIVE, with 5,792,880 shares for $82,433,000 ending in 2017, 4,972,700 shares for $821,000 ending in 2018 and 2,784,259 shares for $367,980 ending in 2019.

Vanguard’s Institutional Index Fund and The Blackstone Group’s Alternative Investment Fund were also holding Riot Blockchain stock last year, but stopped including it in their portfolios.

Also read: Fidelity’s Chief Strategist Starts Bitcoin Index Fund

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