CoinDesk Crypto

Bitcoin is reporting moderate gains on Monday as gold, a safe haven asset, rallies amid renewed coronavirus concerns. 

At press time, the cryptocurrency is priced around $9,430 – up 1.5% on the day – having put in lows near $9,260 during the Asian hours, according to CoinDesk’s Bitcoin Price Index. 

Gold, however, printed a one-month high of $1,759 per ounce early on Monday and was last seen trading near $1,750. 

Related: Bitcoin News Roundup for June 22, 2020

The precious metal looks to be rising as the markets return their focus to the coronavirus pandemic, with the number of new cases rising at a faster pace in Germany, the U.S. and other parts of the world over the past few days. Investors seem worried the major economies may reimpose lockdowns to avoid a second wave of the outbreak, which could worsen an already deep economic crisis. 

Some companies like tech giant Apple have already announced temporary store closures in four U.S. states following a jump in COVID-19 cases last week. 

Authorities in Australia have extended a state of emergency for four more weeks to July 19. Meanwhile, the uptick in the German infection rate caused by an outbreak among abattoir employees has sparked debate about working conditions in its meat processing industry, as noted by popular macro analyst Holger Zschaepitz. 

Hence, it’s perhaps not surprising safe haven assets like gold are drawing bids. A recent study by blockchain analysis firm Chainalysis shows the majority of bitcoin is held by those who treat it as “digital gold,” or an asset to be held for the long term.

Related: New Zealand Police Seize $90M Linked to Alleged BTC-e Exchange Operator

Bitcoin’s uptick seen so far on Monday may bring cheer to those who believe in the safe haven narrative. However, a closer look at the markets suggests the cryptocurrency is tracking S&P 500 futures. 

U.S. stock futures, which were down by nearly 1% during the early Asian trading hours, are now reporting a 1% gain.

Further, while gold has gained over 5% in the last two weeks, bitcoin has largely been restricted to a narrow range of $9,000 to $10,000 since the May 11 halving.

As the top cryptocurrency’s rally from the March 13 low of $3,867 looks to have stalled near $10,000, institutional investors are showing temporary exhaustion, according to one analyst.

“On the CME futures, we are seeing some signs that the bulls might be getting tired waiting for a breakout above $10,000. The average daily traded volume is trending down which is not surprising since it follows price volatility. But at the same time open interest is also trending down,” noted Ecoinometrics, a bitcoin analysis company.

As of Friday, futures listed on the Chicago Mercantile Exchange (CME), which is widely considered to be synonymous with institutional activity, registered trading volume of $195 million, down nearly 80% from the high of $914 million observed on May 11, according to crypto derivatives research firm Skew. 

In addition, open interest – the number of contracts traded but not squared off by taking offsetting positions – was $394 million Friday, down 26% from the high of $532 million seen on May 19. 

While futures activity is slowing down, CME options are reporting record open interest. 

Option contracts worth $417 million were open on the CME on Friday, representing a staggering 3,000% rise from the tally of $13 million observed on May 1. 

As such, one may argue that institutional interest in bitcoin hasn’t died down but merely shifted instruments. 

It remains to be seen if the record open interest on options is rolled over to July expiry contracts following the expiry of June contracts this Friday. 

As of this writing, there are 114,000 contracts set for expiry on June 26, according to Skew. If that open interest is not rolled over to July/September, it would confirm what futures activity is suggesting.

“The last two month-end/month-open (end of April/start of May and start of June) both saw large upside moves as stale positions were rolled off and new positions were put on,” Singapore-based QCP Capital noted on its Telegram channel. “We are questioning whether this can be 3 in a row after such a large open interest, comprising mostly upside calls rolls off, or has the short-term institutional bullishness mostly died down.”

Disclosure: The author holds no cryptocurrency at the time of writing.

• Blackballed by PayPal, Scientific-Paper Pirate Takes Bitcoin Donations
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The Financial Conduct Authority (FCA) has told crypto businesses it will need half a year to fully process applications before the hard deadline in January.

The U.K.’s chief financial regulator announced Monday that any company carrying out “cryptoasset activity in the U.K.” must have submitted their completed applications – outlining how they aim to follow new money-laundering requirements – to the watchdog by June 30. Although the hard deadline for applications is Jan. 10, 2021, the regulator says it wants more than six months to go through firms’ submissions.

“The 30 June date allows the FCA to review submitted applications and raise any follow-up questions with firms, with enough time for that process to be completed before 10 January 2021,” the FCA said.

Related: New York US Attorney Geoffrey Berman Steps Down, President Trump Nominates SEC Chair Jay Clayton to Post [Updated]

Businesses that haven’t successfully registered with the FCA by Jan. 10, 2021, will have to cease all activity in the U.K.

See also: UK Finance Watchdog Warns Against ‘Unauthorized’ Crypto Exchange BitMEX

The FCA first told firms they would need to register in January; soon after, the U.K. transposed FATF’s “Travel Rule” recommendation into national law, which made the regulator responsible for ensuring all crypto businesses follow the new anti-money laundering (AML) and counter-terrorist financing (CTF) requirements.

The FCA brought in guidance for cryptocurrencies last year, where it highlighted what types of tokens currently fall under its jurisdiction. In 2018, it started welcoming crypto startups into its regulatory sandbox, an initiative that allows businesses to set up and test new products and services with temporary and provisory authorization from the regulator.

Related: Russia’s Ministry of Justice Latest to Criticize Proposed Crypto Ban

See also: UK Financial Service Provider to Coinbase, Bitstamp Awarded FCA Payments License

The FCA also appointed its new chief executive, Nikhil Rathi, on Monday. Formerly a director at the London Stock Exchange, he had previously hinted blockchain technology could play a larger role in the infrastructure of the U.K.’s primary stock market.

“You can certainly see distributed ledger technology having an application in the issuance process,” Rathi told CNBC in an interview last year. “I can see that technology being used in settlement too.”

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New Zealand police have seized NZ$140 million (US$90 million) in bank funds linked to Alexander Vinnik, a Russian alleged to have been the controller of the now-defunct BTC-e cryptocurrency exchange.

The seizure of funds, which were controlled by a New Zealand-registered company, is said to be the largest in the country’s history by federal police. The force’s Asset Recovery Unit moved to freeze the funds amid a global investigation into the activities of the exchange and its operators, according to a report by news source NZ Herald.

U.S. prosecutors have alleged that Vinnik controlled BTC-e, a bitcoin exchange that was used to launder billions of dollars for criminal enterprises. Vinnik, who has been denying the charges for up to three years, was arrested based on extradition orders from the U.S. while holidaying with family in Greece back in 2017.

Related: Bitcoin Sees Small Gain as Gold Rallies to One-Month High

New Zealand police allege that the exchange had no anti-money laundering (AML) controls in place, resulting in criminals laundering crime-related proceeds through the platform.

“New Zealand Police has worked closely with the Internal Revenue Service of the United States to address this very serious offending,” Police Commissioner Andrew Coster said. “These funds are likely to reflect the profit gained from the victimisation of thousands, if not hundreds of thousands, of people globally as a result of cyber-crime and organised crime.”

See also: Crypto Exchange Owner Admits Laundering $1.8M in Online Auctions Fraud

Vinnik is now in custody in France after being extradited earlier this year following a ruling from Greece’s Council of State, the country’s supreme administrative court on January 23.

Related: Blackballed by PayPal, Scientific-Paper Pirate Takes Bitcoin Donations

French officials have since charged him with counts of extortion, aggravated money laundering, conspiracy and harming automatic data-processing systems for his alleged involvement in laundering money for criminals.

• Crypto Long & Short: What Changed My Mind About Bitcoin Narratives
• Market Wrap: Bitcoin Spot Volumes Are Weak While Options and DeFi Strengthen

Zhan Ketuan, the formerly-ousted Bitmain co-founder who returned to power earlier this month, is proposing a solution to end the firm’s internal war.

In a letter Sunday, Zhan, who as Bitmain’s biggest shareholder owns 36% of its stock, offered to buy back shares possessed by his rival co-founder Wu Jihan, several founding members and some of Bitmain employees, at a company valuation of $4 billion.

Wu alone controls about 20% of Bitmain and three other founding members own about 15% in total. Bitmain’s employee stock option pool has another 19% and the remaining 10% belongs to external investors.

Related: Bitcoin Miner Maker Ebang Estimates $2.5M Loss for Q1 in IPO Prospectus Update

But Zhan’s $4 billion valuation of the firm is significantly down from a market high seen in the summer 2018. Bitmain had been valued at around $1 billion in September 2017 during its Series A round. When it went on a high profile fundraise in August 2018, it was valued at $12 billion and eventually $14.5 billion in a pre-IPO round.

The offer comes in an effort to bring about negotiations that could end the divisions that have been tearing the company apart since Zhan clawed his way back into the firm after being ousted by Wu last October.

Read more: How Was It Possible for Bitmain to Oust Its Largest Shareholder Overnight?

In addition to causing division among employees, the power struggle is now endangering the firm’s miner manufacturing processes.

Related: Bitcoin Mining Difficulty Makes Biggest Jump in 29 Months

Zhan’s letter had been in response to a Sunday statement on Beijing Bitmain’s official website, which is controlled by Wu, saying that its Hong Kong parent entity had cut off the chip processor supply chain to its Shenzhen factory.

“Bitmain Hong Kong has suspended the chip supply for the time being to Century Cloud Core, which is now controlled by Zhan’s relatives, until we are assured, through negotiation with Zhan’s relatives, that they are committed to protecting the interest of Bitmain’s customers and of the company as a whole,” the statement reads.

Bitmain Technologies Limited in Hong Kong is Bitmain’s offshore sales and procurement center for crypto mining hardware. The bitcoin miner’s manufacturing business relies on computing chips supplied by semiconductor companies.

Since Zhan’s forceful return to the firm, he had seized control of Century Cloud Core, Bitmain’s packaging factory and warehouse in Shenzhen, and paused shipments to customers. According to a former employee at Beijing Bitmain who is familiar with the matter, Zhan’s brother-in-law, Zhou Feng, has been placed in charge of the Shenzhen entity.

In his letter, Zhan responded that, if necessary, he would procure chips directly via Beijing Bitmain, even if that would cause a great deal of loss for the company as a whole.

He further accused Wu of, among other things, forging a resolution passed by a claimed “shareholder meeting” last November at the Bitmain’s Cayman Islands-based holding entity. In fact, the meeting was never held because “several other shareholders including Zhan Ketuan as the biggest stakeholder never received a notice of such meeting ever,” Zhan claimed.

Beijing Bitmain Technology Ltd. is a fully owned subsidiary of Hong Kong-based Bitmain Technologies Ltd. That, in turn, is fully owned by the ultimate controlling entity, BitMain Technologies Holding, which incorporated in the Caymans but also registered in Hong Kong.

Read more: Bitmain’s Power Struggle Takes Toll on Customers as Co-Founder Halts Shipments

When ousting Zhan in October last year, Wu filed to the Hong Kong government to have Zhan’s name removed as a board director at the Cayman holding company.

The two sides now have an ongoing legal case in the Cayman Islands with regards to disputes over Zhan’s 60% voting power at Bitmain.

• Bitmain’s Power Struggle Takes Toll on Customers as Co-Founder Halts Shipments
• Hut 8 Plans $7.5M Offering to Upgrade Bitcoin Mining Rigs

Securitize Japan became the first global token issuance platform to join the Japan Security Token Offering Association (JSTOA), the company announced Thursday.

The Japanese subsidiary of U.S.-based Securitize, the company token platform could not join the association until now because JSTOA only accepts Japanese-regulated entities into its ranks. Securitize co-founder and Chief Executive Carlos Domingo told CoinDesk that a leading Japanese financial services company, SBI Holdings, was one of the founding members of JSTOA, and is a Securitize shareholder. 

Six major Japanese brokerages created JSTOA as a self-regulatory organization last year in a bid to consolidate expertise on securities and develop security token business opportunities in Japan. It is a state recognized financial instruments and exchange association that operates as a self-regulated entity. 

Related: Securitize Debuts On-Chain Royalty Payouts for Lottery.com Security Token

“So we had already talked to them, and some of the members about how as soon as the association was open to non-regulated members, we [wanted] to be the first company but we are not,” Domingo said. 

Headquartered in San Francisco, Securitize expanded its operations to Japan last year after  Japan-based VC firm Global Brain invested in the platform, and has since established a subsidiary company. 

Domingo, who lived in Japan for many years and speaks the language, said there were a number of reasons why Securitize wanted to establish business ties with the country. 

“Japan has been a very forward-thinking country in terms of blockchain and crypto,” Domingo said. 

Related: Securitize Builds Digital ID Service in Hopes of Creating Industry Standard

According to Domingo, Japanese investors are very active in the blockchain space, and Japan has comprehensive laws on cryptocurrency regulation, although it has had trouble making a clear distinction between digital assets and cryptocurrency. Large financial services institutions are also inclined towards taking advantage of adopting blockchain technology and digitization for securities, Domingo added. 

“So, if you put all those things together, we definitely saw that this was an opportunity and moreover, none of our competitors had any presence in Japan,” Domingo said. 

In his view, cracking the Japanese market is not an easy task for foreign entities. 

“Japan can be intimidating for doing business,” he said, adding that the lack of U.S. or European securities platforms operating in the country gave them a competitive advantage. 

The Chairman of JSTOA and Chief Executive of SBI Holdings, Yoshitaka Kitao, said in a statement to the media, that Securitize brings years of experience and proven market success in developing and deploying security token technology. 

“We are very proud to have them join the JSTOA, and look forward to working alongside them,” Kitao added.

• Securitize Users Can Now Directly Trade Security Tokens With Just a Web Link
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A solar energy trading trial run by blockchain startup Power Ledger has found the initiative to be “technically feasible” for real world use.

The trial, which was partly funded by the Australia government, surveyed 48 households in Fremantle, Western Australia and found blockchain energy peer-to-peer energy (P2P) trading delivered lower costs “desired by consumers.”

“Power Ledger has demonstrated how peer-to-peer energy trading can incentivise the right outcomes for the grid in a more cost-effective way,” Power Ledger chairman Jemma Green said in a press release. 

Related: Italian Banks Are Ready to Trial a Digital Euro

The trial ran between December 2018 and January 2020 as part of the RENeW Nexus Project and used Power Ledger’s blockchain technology to trace the transactions of rooftop solar energy traded between households. RENeW is an Australian national not-for-profit organization advocating for sustainable living.

See also: Power Ledger to Bring Blockchain Energy Trading to West Australian Housing Developments

A report detailing the findings of the trial and published earlier this month in a joint effort between Power Ledger, Curtin and Murdoch Universities found energy trading could provide localized energy markets with the ability to deliver a more stable power grid, at lower costs.

Other findings included how the Australian tariff structure needed an overhaul in order to make P2P energy trading more attractive to the consumer as well as making it more readily accessible to deal with excess solar energy (during the day) in the grid without the need for government subsidies.

Related: Online Chess Chooses Algorand Blockchain to Host Player Rankings

“Participants had a positive view of P2P energy trading and could see its benefits but stated that changes to the tariff structure would be required to make it attractive,” the report claimed.

Additionally, the project included a study of a distributed Virtual Power Plant (VPP) as well as a microgrid with a 670kWh battery that is to service homes in the “East Village development in Fremantle.”

The Village is a sustainable development initiative featuring smart homes powered by green renewable energy.

In the case of Power Ledger’s initiative, a virtual power plant is a cloud-based distributed power station that aggregates green energy resources for the purposes of enhancing power generation, as well as trading or selling power on the local electricity market.

See also: Thailand Turns to Blockchain to Boost Renewable Energy Push

“This project is a world-first with great significance for how cities around the world can learn to share solar,” report co-author Peter Newman said in a statement.

• Kraken Launches Crypto Exchange Service in Australia
• Nonprofit Energy Consortium Trials Blockchain Management for Wastewater Tracking

The Italian Banking Association (ABI) announced Thursday that its banks are willing to pilot a digital euro.  

ABI, made up of over 700 Italian banking institutions, expressed its desire to help speed up the implementation of a digital currency backed by the European Central Bank (ECB) by participating in related projects and experiments. Last year, ABI set up a working group to research digital and crypto assets. 

The group shared 10 considerations for a digital euro in Thursday’s announcement, starting with, “Monetary stability and full compliance with the European regulatory framework must be preserved as a matter of priority.” 

Related: Power Ledger’s Blockchain P2P Energy Trial ‘Technically Feasible,’ It Says in New Report

The group prioritized the need for a digital currency framework to be fully compliant with EU regulations to win the public’s trust, and said banks will play a critical role in upholding that trust. 

In its second guideline, the group said Italian banks are already working with distributed ledger technology, referencing the Spunta project. The project was an initiative by the ABI Lab to integrate blockchain to speed up the processing of interbank settlements.

According to the group, a central bank digital currency (CBDC) would lead to future innovations to the traditional banking system like P2P transactions, machine-to-machine transactions and the ability to manage exchange rate and interest rate risk thanks to the programmable capabilities of digital currencies.

“A programmable digital currency represents an innovation in the financial field capable of profoundly revolutionizing money and exchange. This is a transformation capable of bringing significant potential added value, particularly in terms of the efficiency of the operating and management processes,” the announcement said.  

Related: Online Chess Chooses Algorand Blockchain to Host Player Rankings

Italy is not the first nation to express an interest in experimenting with a digital euro. Earlier this year, France’s central bank sent out a call for proposals for CBDC experiments. The Dutch Central Bank also announced the Netherlands was willing to trial a digital euro. 

Last year, the head of Germany’s Central Bank Jens Weidmann, in a speech, warned that a CBDC could destabilize financial systems. Later in the year, the Association of German Banks made an announcement advocating for a programmable digital euro. 

The Italian Central Bank has yet to comment on ABI’s announcement. 

• Canada’s Central Bank Is Serious About Designing a CBDC, Job Posting Reveals
• Digital Currencies Could Replace Low-Interest Bank Accounts, Says UN-Linked Expert

Compound overtook MakerDAO Saturday as the decentralized finance (DeFi) protocol with the most value locked.

As of June 20, Compound has $484 million in cryptocurrency locked, while MakerDAO has $481 million, according to DeFi Pulse. The COMP token is trading at $220.25 as of this writing, according to CoinGecko. It’s all time high price has been $231.

On June 15, Compound users began earning the application’s new governance token, COMP, for all cryptocurrency lent to others on the app and also for all borrowed. Users rushed to get the first disbursements of COMP because the liquid supply on the market is so limited.

Related: Market Wrap: Bitcoin Spot Volumes Are Weak While Options and DeFi Strengthen

This drove many users to supply Compound with considerably more capital, and in most cases, for those users to turn around and borrow against that capital, so they could earn COMP both for borrowing and lending.

To date, MakerDAO has been the dominant platform in DeFi since DeFi Pulse began, so much so that the website has tracked “Maker Dominance,” the percent of all value locked in DeFi that’s held by MakerDAO. The site now lists “Compound Dominance,” which stands at 34.39%.

Last Sunday, before COMP distribution began, there was $97.7 million on Compound and $480.5 million on MakerDAO.

It will take four years for the token supply allocated for users to be completely distributed. Most tokens are held by the founders, team and investors, though in most cases this supply is subject to a vesting period. Compound’s most recent funding round was $25 million led by Andreessen Horowitz.

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The Bank of Thailand is developing a prototype payments system which would rely on a central bank digital currency (CBDC). 

The central bank announced Thursday that it would target businesses, and would design a payment system that could be integrated with the procurement and financial management system of Siam Cement Group, Thailand’s oldest cement manufacturer, and its suppliers. 

The bank said the digital currency prototype is being developed by Digital Ventures, a fintech-facing venture capital wing of the Siam Commercial Bank that invested in Ripple in 2016.

Related: US Fed Chair Says Private Entities Should Not Help Design Central Bank Digital Currencies

According to the statement, the project will also include a feasibility study on the payments system. The CBDC project will begin next month and is expected to conclude by the end of the year. 

“The project marks an important step in broadening CBDC’s scope and adoption to wider audiences, starting with large corporates,” said the press release published on the Bank of Thailand’s website.

The Bank of Thailand said that it expects the CBDC prototype to build on the knowledge put together under Project Inthanon. Inthanon was launched in 2018, and is a collaborative project between the Bank of Thailand, and eight leading Thai financial institutions, to bolster technological readiness in Thailand’s financial sector. 

Bank of Thailand’s prototype comes at a time when central banks across the world have been toying with the idea of CBDCs. A recent job posting on the Bank of Canada’s website revealed the Candaian central bank’s plan to develop a CBDC, and a report from April showed that one of China’s major state-owned banks was conducting trials on a test interface developed for the country’s CBDC. 

• Thailand to Raise $6.4M With Sale of Blockchain-Based Bonds
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• Canada’s Central Bank Is Serious About Designing a CBDC, Job Posting Reveals

U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton may be the next U.S. Attorney for the Southern District of New York.

According to a Department of Justice press release published late Friday, Clayton was nominated by U.S. President Donald Trump to helm the prosecutor’s office, three years after he first took on the role as chairman of the nation’s top securities regulator. Clayton’s term as chairman was slated to expire in 2021.

While initially, the press release said current SDNY U.S. Attorney Geoffrey Berman would be stepping down, he denied plans to resign in a statement late Friday. Trump fired him Saturday, according to a separate statement from U.S. Attorney General William Barr, although Trump himself apparently told reporters he was “not involved.” Ultimately, Berman said late Saturday that he would be stepping down “effective immediately.”

Related: SEC Claims Brothers Lied About Digital Asset Fund Performance, Used Profits for Personal Use

“It has been the honor of a lifetime to serve as this District’s U.S. Attorney and a custodian of its proud legacy,” he said in his second statement.

In Friday’s DOJ statement, attributed to Barr, the department announced that U.S. Attorney for New Jersey Craig Carpenito would serve in the Southern District role on an interim basis starting July 3, until Clayton is confirmed by the U.S. Senate. Barr’s statement on Saturday changed this as well, announcing that Deputy U.S. Attorney Audrey Strauss would instead be filling in on the interim basis.

“I know that under her leadership, this Office’s unparalleled AUSAs, investigators, paralegals, and staff will continue to safeguard the Southern District’s enduring tradition of integrity and independence,” Berman said in his statement Saturday.

According to Stephen Vladeck, law professor at the University of Texas School of Law, it was possible Berman could continue serving until Clayton is confirmed. Martin Lederman, a former Deputy Assistant Attorney General and current law professor at the Georgetown University Law Center, said on Twitter Trump can remove Berman, but Barr cannot.

Related: Bitfinex Granted 2 of 3 Subpoenas in Hunt for Missing Millions

Preston Byrne, a partner and attorney with Anderson Kill, told CoinDesk that the issue surrounding this question is whether the provisions addressing appointments and firings conflict. In his view, “they only conflict if appointees can’t be fired.”

Marc Goldich, co-managing partner of Axler Goldich LLC, told CoinDesk “there’s a decent argument” Berman could have continued serving until Clayton is confirmed.

“Notwithstanding that (and notwithstanding arguments for prosecutorial independence), the President is of course granted executive authority which – at least customarily – includes the authority to fire U.S. Attorneys under Article II of the Constitution,” he said.

Barr’s statement did not indicate who might replace Clayton at the SEC’s helm. On Saturday, he sent an email to staff saying he would continue working at the SEC until he is confirmed, according to Bloomberg. The confirmation process will give New York’s two Senators, Democrats Chuck Schumer and Kirsten Gillibrand, a chance to weigh in on Clayton, according to NPR reporter Carrie Johnson.

“For the past three years, Jay has been an extraordinarily successful SEC Chairman, overseeing efforts to modernize regulation of the capital markets, protect Main Street investors, enhance American competitiveness, and address challenges ranging from cybersecurity issues to the COVID-19 pandemic,” Barr said in his statement.

As SEC chair, Clayton oversaw the regulator during the peak of the 2017 initial coin offering bubble and much of the aftermath. At various events, he has discussed the agency’s approach to the crypto space, including raising questions about the bitcoin market’s ability to be manipulated, size and custody solutions.

“Just speaking for myself, we have to get to a place that we can be confident that trading is better regulated,” he said last September about the crypto space.

SDNY has also been active in crypto regulation, bringing a number of cases against allegedly fraudulent crypto projects. Unlike his predecessors at SDNY, Clayton is not a prosecutor, said Politico reporter Zachary Warmbrodt.

Friday’s announcement comes on the heels of Trump announcing he would be renominating Commissioner Hester Peirce for another five-year term. The move leaves two seats vacant on the SEC, after Democrat Commissioner Robert Jackson Jr. resigned earlier this year. Trump has not yet announced who will replace him.

Commissioners Elad Roisman and Allison Herren Lee are the other two members of the SEC.

UPDATE (June 20, 2020, 22:15 UTC): This article has been updated extensively as new information became available.

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U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton may be the next U.S. Attorney for the Southern District of New York.

According to a Department of Justice press release published late Friday, Clayton was nominated by U.S. President Donald Trump to helm the prosecutor’s office, three years after he first took on the role as chairman of the nation’s top securities regulator. Clayton’s term as chairman was slated to expire in 2021.

The press release said current SDNY U.S. Attorney Geoffrey Berman would be stepping down, but he denied plans to resign in a statement late Friday. Trump fired him Saturday, according to a separate statement from U.S. Attorney General William Barr.

Related: SEC Claims Brothers Lied About Digital Asset Fund Performance, Used Profits for Personal Use

“I have not resigned, and have no intention of resigning, my position, to which I was appointed by the Judges of the United States District Court for the Southern District of New York,” Berman said in the SDNY statement late Friday.

In Friday’s DOJ statement, attributed to Barr, the department announced that U.S. Attorney for New Jersey Craig Carpenito would serve in the Southern District role on an interim basis starting July 3, until Clayton is confirmed by the U.S. Senate. Barr’s statement on Saturday changed this as well, announcing that Deputy U.S. Attorney Audrey Strauss would instead be filling in on the interim basis.

According to Stephen Vladeck, law professor at the University of Texas School of Law, it was possible Berman could continue serving until Clayton is confirmed. Martin Lederman, a former Deputy Assistant Attorney General and current law professor at the Georgetown University Law Center, said on Twitter Trump can remove Berman, but Barr cannot.

Preston Byrne, a partner and attorney with Anderson Kill, told CoinDesk that the issue surrounding this question is whether the provisions addressing appointments and firings conflict. In his view, “they only conflict if appointees can’t be fired.”

Related: Bitfinex Granted 2 of 3 Subpoenas in Hunt for Missing Millions

Marc Goldich, co-managing partner of Axler Goldich LLC, told CoinDesk “there’s a decent argument” Berman could have continued serving until Clayton is confirmed.

“Notwithstanding that (and notwithstanding arguments for prosecutorial independence), the President is of course granted executive authority which – at least customarily – includes the authority to fire U.S. Attorneys under Article II of the Constitution,” he said.

Barr’s statement did not indicate who might replace Clayton at the SEC’s helm. On Saturday, he sent an email to staff saying he would continue working at the SEC until he is confirmed, according to Bloomberg. The confirmation process will give New York’s two Senators, Democrats Chuck Schumer and Kirsten Gillibrand, a chance to weigh in on Clayton, according to NPR reporter Carrie Johnson.

“For the past three years, Jay has been an extraordinarily successful SEC Chairman, overseeing efforts to modernize regulation of the capital markets, protect Main Street investors, enhance American competitiveness, and address challenges ranging from cybersecurity issues to the COVID-19 pandemic,” Barr said in his statement.

As SEC chair, Clayton oversaw the regulator during the peak of the 2017 initial coin offering bubble and much of the aftermath. At various events, he has discussed the agency’s approach to the crypto space, including raising questions about the bitcoin market’s ability to be manipulated, size and custody solutions.

“Just speaking for myself, we have to get to a place that we can be confident that trading is better regulated,” he said last September about the crypto space.

SDNY has also been active in crypto regulation, bringing a number of cases against allegedly fraudulent crypto projects. Unlike his predecessors at SDNY, Clayton is not a prosecutor, said Politico reporter Zachary Warmbrodt.

Friday’s announcement comes on the heels of Trump announcing he would be renominating Commissioner Hester Peirce for another five-year term. The move leaves two seats vacant on the SEC, after Democrat Commissioner Robert Jackson Jr. resigned earlier this year. Trump has not yet announced who will replace him.

Commissioners Elad Roisman and Allison Herren Lee are the other two members of the SEC.

UPDATE (June 20, 2020, 19:55 UTC): This article was updated with a comment from Geoffrey Berman and additional information.

• Russia’s Ministry of Justice Latest to Criticize Proposed Crypto Ban
• Mauritius Releases Guidance for Regulated Security Token Offerings

U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton may be the next U.S. Attorney for the Southern District of New York.

According to a Department of Justice press release published late Friday, Clayton was nominated by U.S. President Donald Trump to helm the prosecutor’s office, three years after he first took on the role as chairman of the nation’s top securities regulator. Clayton’s term as chairman was slated to expire in 2021.

The press release said current SDNY U.S. Attorney Geoffrey Berman would be stepping down, but he denied plans to resign in a statement late Friday.

Related: SEC Claims Brothers Lied About Digital Asset Fund Performance, Used Profits for Personal Use

“I have not resigned, and have no intention of resigning, my position, to which I was appointed by the Judges of the United States District Court for the Southern District of New York,” Berman said in the statement.

Meanwhile, in a statement attributed to Attorney General William Barr, the DOJ announced that U.S. Attorney for New Jersey Craig Carpenito would serve in the Southern District role on an interim basis starting July 3, until Clayton is confirmed by the U.S. Senate.

According to Stephen Vladeck, law professor at the University of Texas School of Law, it is possible Berman can continue serving until Clayton is confirmed. However, Martin Lederman, a former Deputy Assistant Attorney General and current law professor at the Georgetown University Law Center, said on Twitter Trump can remove Berman, but Barr cannot.

Preston Byrne, a partner and attorney with Anderson Kill, told CoinDesk that the issue surrounding this question is whether the provisions addressing appointments and firings conflict. In his view, “they only conflict if appointees can’t be fired.”

Related: Bitfinex Granted 2 of 3 Subpoenas in Hunt for Missing Millions

Marc Goldich, co-managing partner of Axler Goldich LLC, told CoinDesk “there’s a decent argument” Berman can continue serving until Clayton is confirmed.

“Notwithstanding that (and notwithstanding arguments for prosecutorial independence), the President is of course granted executive authority which – at least customarily – includes the authority to fire U.S. Attorneys under Article II of the Constitution,” he said.

Barr’s statement did not indicate who might replace Clayton at the SEC helm.

“For the past three years, Jay has been an extraordinarily successful SEC Chairman, overseeing efforts to modernize regulation of the capital markets, protect Main Street investors, enhance American competitiveness, and address challenges ranging from cybersecurity issues to the COVID-19 pandemic,” Barr said in his statement.

As SEC chair, Clayton oversaw the regulator during the peak of the 2017 initial coin offering bubble and much of the aftermath. At various events, he has discussed the agency’s approach to the crypto space, including raising questions about the bitcoin market’s ability to be manipulated, size and custody solutions.

“Just speaking for myself, we have to get to a place that we can be confident that trading is better regulated,” he said last September about the crypto space.

SDNY has also been active in crypto regulation, bringing a number of cases against allegedly fraudulent crypto projects. Unlike his predecessors at SDNY, Clayton is not a prosecutor, said Politico reporter Zachary Warmbrodt.

Friday’s announcement comes on the heels of Trump announcing he would be renominating Commissioner Hester Peirce for another five-year term. The move leaves two seats vacant on the SEC, after Democrat Commissioner Robert Jackson Jr. resigned earlier this year. Trump has not yet announced who will replace him.

Commissioners Elad Roisman and Allison Herren Lee are the other two members of the SEC.

UPDATE (June 20, 2020, 05:09 UTC): This article was updated with a comment from Geoffrey Berman and additional color.

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Related: Drug Dealer Just Sentenced to 25 Years Hoped to Build a Better Bitcoin Miner

“His management experience and expertise in financial regulation give him an ideal background to lead the United States Attorney’s Office for the Southern District of New York, and he will be a worthy successor to the many historic figures who have held that post.”

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Racial diversity and financial inclusion are good for cryptocurrency and blockchain – and the industry has work to do.

That was the overarching conclusion of a virtual Juneteenth event put together by Cleve Mesidor, founder of the National Policy Network of Women of Color in Blockchain. 

Juneteenth is the celebration of June 19, 1865, when the last group of enslaved African Americans were made aware of the Emancipation Proclamation that U.S. President Abraham Lincoln had signed two years earlier. 

Related: Why Crypto Matters for Financial Inclusion, Feat. Celo’s Marek Olszewski

While America’s education system has left many ignorant of the origins of Juneteenth, there has been a revived interest in turning the day into a national holiday after protests sprung up around the world in response to the May 25 police killing of an unarmed Black man named George Floyd.

In a wide-ranging conversation Friday, panelists at the event said crypto has the potential to allow citizens to opt out of what they described as a racist financial system on Wall Street. That said, the panelists added, Black people and people of color must be part of the development of the technology for that to happen.

Read more: Bitcoin Is a Way to Repair Economic Injustice: Author Isaiah Jackson

Isaiah Jackson, founder of KRBE Digital Assets Group and author of Bitcoin & Black America, said he believes that Black investment in digital assets would create a more resilient system than Black Wall Street, a Black business district that was burned down by white mobs during the Tulsa race massacre of 1921.

Related: Libra Minus Facebook: Why Celo Is 2020’s Buzzy Token Project

“You can’t burn down cryptocurrency and blockchain technology,” Jackson said. “I want to encourage everyone to stay vigilant and make sure you start to move your money and savings out of this failing system. … We need to make sure we use censorship-resistant and scarce-money systems such as bitcoin.”

Sinclair Skinner, the co-founder of pan-African bitcoin remittance firm BitMari, agreed, saying the ethos of bitcoin and the ethos of the Black community are aligned.

“We say that Satoshi is Black,” Skinner said. “But Satoshi was probably a Black woman because a man would have never been able to walk away and not take credit.”

Despite crypto’s potential, however, the industry is not immune to the same societal ills that have affected the broader world, Skinner said.

“Blockchain is full of racists,” he said. “It’s just like the rest of society.”

In the fight for venture capital, blockchain enthusiasts should remember that cryptocurrency entrepreneurs and Black founders face the same issues – being turned away for being different, Mesidor said.

In turn, entrepreneurs should choose investors that have diverse funds, said Jalak Jobanputra, founding partner of Future\Perfect Ventures, an early-stage fund investing in blockchain technology and machine learning.

“We have to make sure that diverse voices are represented unlike what happened with the internet 20 years ago when it was really created by one demographic for one demographic,” Jobanputra said.

Read more: How an Art Collective Is Using Blockchain to Protest Police Brutality

One source of funding that crypto entrepreneurs could be tapping more is Black family offices, said Genevieve Leveille, CEO of AgriLedger, a U.K.-based blockchain firm trying to ensure pay equity for farmers.

“We are going to a technology which is very nascent and many people do not clearly see yet the opportunities,” she said. “There are plenty of Black family offices and we should be tapping into that network.”

Crypto is also another way that Black entrepreneurs can achieve economic equality, said Jomari Peterson, a Ph.D. student at Carnegie Mellon University focused on empowering underrepresented communities through microlending and gaming.

“We cannot wait until it’s too late and those systems are already around us,” Peterson said.

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The National Bank of Cambodia revealed the technical details of its upcoming blockchain-based payments system dubbed ‘Project Bakong’ this week.

The central bank, which has been building Project Bakong since 2017, views its quasi-digital currency project as a high-tech revamp of the Khmer Riel, Cambodia’s official currency but hardly its de facto cash choice, as locals have favored the U.S. dollar for decades, according to the white paper published Thursday.

The central bank said Bakong will help challenge the dollar’s reign by inducing Cambodians to pay instead via QR codes and a mobile app, with a Hyperledger Iroha blockchain facilitating real-time fund transfers between e-wallets plugged into their bank accounts. 

Related: How an Art Collective Is Using Blockchain to Protest Police Brutality

That permissioned blockchain will work between Bakong accounts and traditional accounts, record transactions on a distributed ledger, reach consensus via the block voting hash-based “Yet Another Consensus” algorithm, and process transactions in five seconds or less, according to the white paper.

“Transaction throughput is between 1,000 and 2,000 transactions per second,” depending on tech specs, the central bank said in the white paper. “This suggests that there is potential for this project to scale.”

Watch: Cambodia’s Project Bakong and the Future of Payments

The bank said its system’s peer-to-peer nature removes the inefficiencies of centralized clearing house models without costing users anything to transact. 

Related: Alchemy Notify Wants to Simplify Blockchain UX With a Single Push

“Since banks and individual users are now brought into one DLT platform both banks and users no longer face interconnectivity and interoperability problems,” the central bank said.

Cambodian officials have been hesitant to label the fiat-backed Project Bakong a central bank digital currency (CBDC) in the past, instead calling it a blockchain payments system. Users must load Riel into their Bakong accounts before they can transact with others. That’s different from a natively digital CBDC.

Even so, the white paper frames Bakong against the proliferation of CBDC projects in highly-developed countries around the world. But while the paper said such nations may turn to CBDC to address their population’s falling cash use rates, in developing countries – a category in which Cambodia may remain for decades – it said that CBDC can promote financial inclusion, improve inefficient payment systems and even reduce poverty by opening access.

(Notably, the National Bank of Cambodia is one of the few central banks whose future-of-money initiative actually relies on a blockchain.)

The demographically-young and increasingly tech-savvy population of Cambodia will likely boost Bakong adoption, according to the bank. Cambodians are increasingly porting their financial lives onto their phones: e-wallet accounts in the country climbed 64% in 2019 to a record 5.22 million, according to the paper.

See also: Policymakers Shouldn’t Fear Digital Money: So Far It’s Maintaining the Dollar’s Status

Mass adoption may also grant the central bank a greater degree of control over Cambodia’s monetary policy by breaking the dollar’s decade-long local hold. Bank officials are already moving to oust the U.S. dollar: Last month, the central bank announced plans to phase out $1, $2 and $5 banknotes by the end of August.

It is still unclear precisely when Project Bakong will fully launch. The white paper said “early 2020,” despite being published midway through the year.

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Bitcoin spot volume may have been low this week, but the real action in crypto has been in the options market and decentralized finance. 

Bitcoin (BTC) was trading around $9,274 as of 20:00 UTC (4 p.m. ET), slipping 1% over the previous 24 hours. 

At 00:00 UTC on Friday (8:00 p.m. Thursday ET), bitcoin was changing hands around $9,368 on spot exchanges such as Coinbase. It slogged around a tight range between $9,280 and $9,428 during the preceding 19 hours. Its price is now below its 10-day and 50-day moving averages – a bearish signal for market technicians who study charts.

Related: New York Fed’s ‘Bitcoin Is Just Another Fiat’ Claim Sparks Controversy

“Since the halving mid-May, bitcoin has gone nowhere, basically stuck in a range of $8,500 to $10,200,” said David Lifchitz, chief investment officer for quantitative trading firm ExoAlpha. 

Trading has dipped on spot exchanges like Coinbase, with its three-month average daily volume at $171 million. Over the past week, its seven-day average has been $82 million, more than 50% lower. 

Next week, on June 26, approximately $1 billion in bitcoin options will expire, and traders expect price movements that could be violent as a result. “Price action is like a spring,” said Lifchitz. “The longer it remains stuck in a narrow range, the more any breakout on the upside or the downside will be violent, just like a spring expands the more violently the more it is compressed.”

Read More: Outflow of Bitcoin From Miners at Lows Not Seen Since 2010

Related: DeFi Startups Built on Compound Weigh What to Do With $200 COMP Tokens

The majority of bitcoin options expiring are bullish bets on the price going up, wrote Singapore-based quantitative trading firm QCP Capital in an investor note Friday. “The end-June open interest is concentrated in calls with strikes around $10,000-$15,000, and likely a function of institutional interest as a good portion of the calls were executed on CME.”

This may suggest the smart money is betting on a better bitcoin price. CME is a venue professional commodities traders use for different futures and options strategies. The growing bitcoin options open interest there, including a record $372 million in open interest June 10, shows increased crypto interest by sophisticated investors.  

“We’ve now had a long period of sideways consolidation since the beginning of May, out of which will come a sharp move higher or lower,” said Rupert Douglas, head of institutional sales for London-based brokerage Koine. “As long as the market can hold above $9,000, I still favor the upside, which could see bitcoin testing above $12,000.” 

Excitement around COMP, the governance token of the Ethereum-based Compound lending network, has certainly given some traders new ideas on how to profit from the growing interest in decentralized finance, or DeFi. Ether (ETH), the second-largest cryptocurrency by market capitalization powering the Ethereum network, was trading around $228 and slipped 1% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: Compound’s COMP Token More Than Doubles in Price Amid DeFi Mania

One quantitative firm has seen traders use Ethereum-based stablecoin arbitrage as part of a strategy to make gains on COMP’s growth. “We saw traders using USDC to borrow USDT and other stablecoins on Compound to earn COMP, then use Curve to swap the USDT back to USDC and repeat the process,” said Peter Chen, a trader at Hong Kong-based OneBit Quant. 

Curve is a decentralized exchange, or DEX, that launched earlier this year. Many well-capitalized traders say DEXes are slow and have low liquidity, making it difficult to execute large trades. However, the growth of stablecoin-heavy Curve and other DEXes as an alternative to the centralized spot and derivative crypto exchanges may allow many traders, over the long-term, to develop exciting new DeFi-based strategies.

Curve is dominating the DEX market Friday, with its $24.7 million volume in the past 24 hours outpacing second-place Uniswap, at $16.2 million in volume, according to aggregator Dune Analytics. 

Read More: Other Eye-Opening Data Points on Compound’s Surge in Demand

Digital assets on CoinDesk’s big board are almost all in the red Friday. Significant losers include dash (DASH) in the red 2.2%, zcash (ZEC) dipping 2.1% and monero (XMR) slipping 2%. The lone cryptocurrency winner on the day is ethereum classic (ETC) up 3.4%. All price changes were as of 20:00 UTC (4:00 p.m. ET).

Read More: ParaFi Invests in Kyber Network as Buzz Grows Around DeFi Projects

In commodities, oil jumped 1.6% Friday, with a barrel of crude priced at $39.58 at press time.

Gold is up 1.2%, trading around $1,742 for the day. 

The Nikkei 225 of publicly traded companies in Japan ended trading up 0.55% Friday and in the green 0.78% for the week as the government lifted travel restrictions. 

The FTSE 100 index in Europe climbed 0.81% and closed the week up 3% on optimism government actions are having a positive impact on the economy there. 

The U.S. S&P 500 index gained 0.56%, up 2% for the week, as a roller-coaster ride Friday was fueled by concerns of the coronavirus continuing to wreak havoc on the economy.

U.S. Treasury bonds all slipped Friday. Yields, which move in the opposite direction as price, were down most on the two-year bond, in the red 15%.

• Tether’s Supply on Compound Jumps to Over $224M in a Week
• First Mover: Compound’s COMP Token More Than Doubles in Price Amid DeFi Mania

Economists with the New York Federal Reserve do not think bitcoin is a new kind of money.

Bitcoin, the decentralized, permissionless, trustless digital value system that an anonymous programmer created over a decade ago is “just another example of fiat money,” said Michael Lee and Antoine Martin in a Thursday blog post.

“Bitcoin may be money, but it is not a new type of money,” they said. Dollar bills are fiat, gigantic limestone wheels were once fiat and bitcoin is fiat as well, they said.

Related: Market Wrap: Bitcoin Spot Volumes Are Weak While Options and DeFi Strengthen

Their argument appeared to employ a definition of fiat money as being an intrinsically worthless object whose sole value derives from the bearer’s belief he or she can use it for goods.

But such a definition misclassifies the nature of bitcoin by botching the very meaning of fiat, said Nic Carter, a partner at the blockchain-focused Castle Island Ventures and frequent crypto commentator (including for CoinDesk). 

Carter said fiat currency, such as dollar bills, has value because the issuing authority says so. But that is not at all the case with bitcoin, he said.  

“I don’t know if their intent is to denigrate bitcoin but it comes off that way,” Carter said of the NY Fed economists. In a tweet he called the Fed’s argument “insane.”

Related: Outflow of Bitcoin From Miners at Lows Not Seen Since 2010

Martin and Lee posit that the Bitcoin ecosystem’s true newness lies in the novel “exchange mechanism” it spawned. “The ability to make electronic exchanges without a trusted party – a defining characteristic of Bitcoin – is radically new,” they said.

Simply put, there had never been a true means to conduct “electronic transfers without a third party” before Bitcoin came around, they said. Yes, central banks and commercial banks and an ecosystem of financial products all allowed money to flow electronically before. But those all worked because a third party said so. They said that’s not the case with Bitcoin.

Bitcoin’s innovation permits an ensuing wave of similarly trustless monies to foster and grow: stablecoins, initial coin offerings as well as unexpected assets, like CryptoKitties, they point out. But they also argue that none of those are new forms of money either.

“It is more accurate to think of Bitcoin as a new type of exchange mechanism that can support the transfer of monies as well as other things,” they said.

Carter agrees Bitcoin gave the world a new way to move money, challenged the authors’ assertion the Bitcoin blockchain should harbor other assets and said it was impossible to divorce bitcoin’s monied nature from the mechanism it exists upon.

“The monetary qualities are also essential. That was clear in the way Satoshi described” its limited supply, he said.

The economists concluded it’s important to define what is actually new about bitcoin for historical reasons. 

“History provides lessons about what makes a good money as well as what makes a good transfer mechanism,” they wrote. “These lessons could help cryptocurrencies evolve in a way that makes them more useful.”

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The token for the decentralized finance (DeFi) app Compound, COMP, hit an all-time high of $231 on Friday. Now startups built on top of the lending protocol are considering what to do about this sudden windfall.

Compound was built from the beginning as a simple marketplace for placing collateral and borrowing money. The intention was always to make it easy for other companies to build products atop it, and several have. 

But some startups are in a situation where they have control of COMP earned from funds entrusted to them by their customers. The question then becomes: Do they return that COMP to users immediately or use it to lock in other benefits? And if they do redistribute it now, do they simply give users COMP or convert it first to a more familiar form of crypto? 

Related: Tether’s Supply on Compound Jumps to Over $224M in a Week

CoinDesk checked in with companies built on top of the Ethereum-based application this week to find out their plans for using the fresh COMP tokens earned by users of their platforms. 

While the startups we spoke with were still exploring which course of action would be best, they generally agreed COMP’s rapid ascent is a positive moment for the DeFi industry.

Read more: A Coinbase Pro Listing and Other Eye-Opening Data Points on Compound’s Surge in Demand

Dharma CEO Nadav Hollander explained the implications of opening up governance of Compound for a company like his. In an email to CoinDesk, he wrote, “It’s like being a bank and getting to vote at Federal Reserve meetings – only any user of the protocol can do it.”

Related: Blockchain Bites: COMP x2, Reddit Scales and Factom Goes Bankrupt

In fact, Dharma has already been actively taking part. It has a proposal in now to increase the amount of interest earned on tether (USDT) deposits on Compound. Such deposits go into the reserve pool, a sort of security blanket that each liquidity pool creates for itself. As a governance token, COMP is used to stake a person’s or entity’s vote, either for or against.

According to DeFi Pulse, Compound’s total value locked (TVL) now stands at $418 million, $80 million short of overtaking MakerDAO, the dominant protocol in DeFi. Compound has added over $300 million in liquidity since COMP distribution began on June 15.

The COMP token is trading at $218 as of this writing, according to CoinGecko, for a market cap – separate from the Compound protocol’s TVL – of roughly $570 million. The market cap of Maker’s governance token, MKR, currently sits at $466 million.

Meanwhile, Dharma is still sorting out how to handle COMP that its users are earning.

Dharma is a smart-wallet app that lets users deposit dai to earn interest easily. It also allows them to easily pay each other in dai, much like Venmo. While dai has not been the most popular asset on Compound lately (USDC and USDT have), each depositor and borrower on Dharma still earns some COMP each day as it gets distributed. 

Read more: Crypto Lender Dharma Pivots to Stablecoin Savings Accounts

Dharma’s COO has spoken about the options that Dharma is considering on Twitter. It is considering holding onto the COMP for now so that Dharma can be a stronger voter in governance, but it may also directly distribute the COMP to users or convert it to dai and then distribute it. 

Forster tweeted, “We’ve been discussing this internally and in our Discord channel. Haven’t reached a conclusion yet.” 

PoolTogether is a lossless lottery. Users deposit their funds with PoolTogether in order to win a chance at winning all the interest earned by everyone else who did the same.

PoolTogether has a weekly dai pool and a daily USDC pool, but their returns have been hammered by the way liquidity mining has changed the market. 

“PoolTogether contracts are earning COMP and currently, the value of that COMP is actually greater than the value of the interest accruing to the prizes!,” Leighton Cusack, the founder, told CoinDesk in an email. “However, when we designed the protocol we did not have COMP in mind so there is not a mechanism right now to re-distribute it to depositors or include it in the prize.”

Read more: Coinbase Pumps $1.1M USDC Into DeFi Sites Uniswap and PoolTogether

Cusack let his community know that this was a question under consideration the week before COMP started to be distributed.

Like Dharma, it’s considering holding onto COMP so it can vote the tokens in the interest of PoolTogether users. That said, Cusack also wrote, “The most likely scenario though is that we’ll include the accrued COMP in the prize distribution. So longer-term this will be great for users as the value of the COMP will supercharge the prize size.”  

Staked is a startup that takes care of the hard part if users have a token on which they can earn a yield. It even has a product that will move assets around to optimize their income, called RAY, for Robo Advisor for Yield. 

Staked CEO Tim Ogilvie told CoinDesk, “Any COMP earned is distributed to depositors. Next week we’re going to update our algorithm so the yield attributable to Compound includes both interest and the value of the COMP earned.”

Linen and Argent are both wallet applications that make it easy to move assets into Compound and earn interest. Because all deposits in Compound are tokenized, this is simple to do in a non-custodial fashion; if your wallet can hold USDC it should be able to hold cUSDC (the tokenized version of a deposit of USDC on Compound). 

Argent posted on its blog Wednesday that its users would be able to keep track of COMP earnings right in their wallet and use it like any other token. 

Read more: Paradigm Leads $12M Round for DeFi-Friendly Wallet Startup

Linen founder and CEO Vitaly Bahachuk told CoinDesk via email that it would do the same. He wrote, “Linen app is powered by a user self-custody wallet and Linen does not have access to members’ assets including access to COMP. We will build an in-app interface where our members can claim their COMP and use COMP however they chose to.”

One choice they might make, HODL the COMP and delegate to Linen to vote their interests. Linen has declared itself as a delegate for voting on Compound protocol questions. 

Opyn has also declared itself as a Compound delegate. 

The company built a decentralized protocol for hedging risk on ERC-20 tokens. While using Opyn itself does not create a way that users would earn COMP, its application may be more valuable in a highly volatile market like the one created by COMP’s release into the wild.

Read more: Options Protocol Brings ‘Insurance’ to DeFi Deposits on Compound

When Opyn creates a hedge, it also tokenizes it. So if a user buys a hedge against ETH dropping they get oETH. With so many users converting USDT into Compound deposit tokens, cUSDT, the ever-lingering concerns about tether have become salient to Opyn’s community.

“We’ve seen user demand for ocUSDT (protection on USDT deposits in Compound) as lots of DeFi users have been attracted to the COMP incentives for USDT,” Opyn co-founder Alexis Gauba told CoinDesk. 

With the price of COMP going so high so suddenly, there has been discussion on Twitter of creating a hedge for the governance token. 

Gauba wrote, “The Opyn team does currently have plans for an oCOMP token, however, the protocol is completely open and supports options on any arbitrary ERC-20 token, so anyone could create an oCOMP token!”

• OpenZeppelin Discloses ‘High Severity Vulnerability’ in DeFi Wallet Argent
• First Mover: Compound’s COMP Token More Than Doubles in Price Amid DeFi Mania

Tether’s volume on decentralized lender platform Compound has soared as traders try to maximize the amount of COMP they receive.

Data from Compound shows the supply of the USD-backed stablecoin has quadrupled from roughly $43.7 million at the start of the week, to over $224 million on Friday. This time last week, USDT supply had just about crossed the million-dollar mark.

With 2,000 suppliers (lenders) and just over 400 borrowers, USDT one of the largest and most active lending markets on the Compound protocol. For comparison, the supply for USDC, another stablecoin, is currently just under the $170 million mark – although the number of lenders is far higher at over 5,500.

Related: DeFi Startups Built on Compound Weigh What to Do With $200 COMP Tokens

“USDt’s growth on Compound has been faster than the growth of any other asset in the protocol, by multiples,” said Calvin Liu, Compound’s strategy lead, in a statement.

See also: A Coinbase Pro Listing and Other Eye-Opening Data Points on Compound’s Surge in Demand

This bookends a rather manic week for Compound. Total value locked (TVL) has been on a near-vertical trajectory since the release of its new governance token, COMP, on Monday – it broke past the $100 million boundary on the same day, for the first time.

At the time of writing, TVL stood at just under $400 million, according to data site DeFi pulse.

Related: Blockchain Bites: COMP x2, Reddit Scales and Factom Goes Bankrupt

One of the reasons for Compound’s soaring popularity this week might be that users are trying to receive as much COMP tokens as they can. The platform rewards all activity with COMP, so both lenders and borrowers are directly incentivized to use the platform as much as possible.

This incentive has created a feeding frenzy as COMP soars in price. The token price has more than doubled in the past 24 hours to $200. The rise has been so rapid that aggregation sites are flashing different numbers for market value. At press time, DeFi Market Cap gave Compound a market cap of $1.9 billion, whereas CoinGecko had gone for a more conservative $500 million.

Automated market maker Curv told CoinDesk earlier this week that it was seeing users depositing USDC as collateral to borrow USDT and using that borrowed USDT as a deposit for borrowing the USDC back again. Some users repeat this process up to 30 times – the maximum leverage on Compound – which they use to maximize their COMP allocation.

See also: As Tether Supply Hits Record Highs, It Moves Away From Original Home

CoinDesk asked Tether whether it thought the surge in USDT supply on Compound could be users trying to game the system.

“It wouldn’t be appropriate for Tether to comment on this,” the spokesperson said.

• OpenZeppelin Discloses ‘High Severity Vulnerability’ in DeFi Wallet Argent
• First Mover: Compound’s COMP Token More Than Doubles in Price Amid DeFi Mania

A little-known virtual currency fund heavy on math and statistics is turning a steady profit under a lead trader who once oversaw a major cryptocurrency exchange.

Galois Capital, a San Francisco cryptocurrency hedge fund that launched in January 2018, said in an investor letter and financial filings that it increased its holdings from $10 million to $23 million in two years with high-frequency trading and funds from new investors lured by returns. A quantitative fund manager, Galois Capital computationally makes bulk volumes of speedy, precise trades shaped by its founder and lead trader Kevin Zhou, previously head of trading at American cryptocurrency exchange Kraken, and a team of technical talent.

“Most of us are math, physics or computer science folks,” Zhou told CoinDesk, adding that highly sought International Mathematical Olympiad competitors have been sending in their resumes. 

Related: Kraken Launches Crypto Exchange Service in Australia

Quantitative approaches to trading are wide-ranging. They might encompass regression modeling, direction and magnitude calculations for price prediction or stochastic processes for volatility modeling and options pricing, Zhou said. On the technology side, programming interfaces, trading software and hardware equipment enabling fast communications and data analysis with exchanges are used.

Galois Capital built much of this architecture from the ground up, with custom tools such as co-located servers and network adapters, due to what Zhou cites as a dearth of heavy-duty options for cryptocurrency traders found at Hudson River Trading and Jane Street Capital, two of the biggest Wall Street quantitative trading funds. 

Read more: Hedge Fund Pioneer Turns Bullish on Bitcoin Amid ‘Unprecedented’ Monetary Inflation

Overall, the quantitative bent is still relatively tame at Galois Capital. For Zhou, sophisticated trading models and technologies, such as the machine learning software the fund experimented with and shelved, are sometimes overkill in this era of cryptocurrency markets.

Related: Kraken

“What works is a lot simpler than what would work in traditional markets,” said Zhou. “Some of these models that we have right now would not work in traditional markets, in more mature and more efficient markets.”  

While trading is easier in the crypto-asset class than in traditional asset classes, Zhou said, the field has gotten more competitive since he managed from 2013 to 2017 at Buttercoin, a bygone bitcoin exchange backed by Silicon Valley-located startup incubators Google Ventures and Y Combinator, and from 2015 to 2017 at the trading desk at Kraken.

At Buttercoin, “the sizes of transactions were a lot smaller. The spreads were a lot bigger. I remember there were days where you were getting 100 bps [basis points] just trading $100,000,” said Zhou. “At Kraken, spreads tightened up a bit. It was like 40, 50 bps on $200,000. Now, it’s a lot tighter, probably a million dollars gets 10, 15 bps.” A spread is the difference between a financial instrument’s bid and ask price; a “bp” (pronounced “bip”), or a basis point, reflects a 0.01% change in a financial instrument’s value.

Considering Kraken is valued at $4 billion and processes millions of dollars in cryptocurrency flows each month, Kraken’s trading desk was an all-seeing looking glass into why cryptocurrencies are bought and sold in a large corner of the market. It gave Zhou a knack for sizing up counterparty motivations with Galois Capital’s programmed trades, where the other trading actor is faceless.

“When you’re market-making with bots on all these different exchanges, you don’t actually get matched up with on the other side,” Zhou said. At Kraken, his trading desk dealt with miners and investors, up close and personal, who gave context into their market movements. “So just being able to read Kraken’s book,” as in the exchange’s record of buy and sale orders, “is definitely informative.”

In terms of trading volume, Galois Capital went from processing $671 million to $1.4 billion between 2018 and 2019, the investor letter says. While non-algorithmic trades shrunk from $666 million to $562 million, its algorithmic trades blew up from $5 million to $876 million to enlarge the fund’s share in crypto-asset markets.

According to Zhou, about 85% of Galois operations are geared towards liquidity provision, matching crypto-assets at prices quoted by bidders, similar to services offered by Genesis Trading, Cumberland DRW and Circle. The other 15% of operations were focused on hedge fund management of cryptocurrency plays. Galois Capital started with over-the-counter (OTC) trading — manual liquidity provision and Zhou’s specialty at Kraken — and branched out into algorithmic market-making — automated liquidity provision — and discretionary trading.

With market-making, generally you don’t want to be holding onto risk for that long. What I mean by that is more than 30 seconds.

“Liquidity provision in the traditional markets is handled by prop shops rather than hedge funds. So we’re in kind of a unique situation in that most crypto funds are long only in these different tokens, or they’re long-short and look at factors like trying to detect momentum signals and reverse signals,” Zhou said.

“I want to be able to generate profits regardless if the market’s moving up or down, regardless if there’s momentum or reversion, just based on the micro-structure of the market, just based on providing compensation for providing liquidity to the market,” Zhou said. “To me, that seems a lot safer and generally, as a trader, I’m more conservative.”

Galois’ hedge fund wing, which emphasizes derivatives, quantitative long-short and discretionary long-short trades, as of January 2020 netted to-date 29.5% for a Class A fund and 53.5% for a Class B fund. (The funds charge different fees on investment subscriptions, which begin at $50,000 an investor.) The two-year returns outdid several benchmarks over the corresponding period, such as a 20.8% S&P 500 gain, a 46.6% bitcoin loss, a 32.6% cryptocurrency hedge fund loss and a 4.6% non-cryptocurrency hedge fund gain, according to the CoinDesk Bitcoin Price Index and Eurekahedge return indices.

The Class A fund was, however, more volatile than the Class B fund: According to the investor letter, the Class A fund tumbled 22.4% in 2018 and spiked 66.8% in 2019; the Class B fund ticked up 33.9% in 2018 and 19.3% in 2019. 

“We don’t really have that much of a long-term portfolio that holds the large positions longer. For us, a lot of this is just very short-term inventory balances,” Zhou said to CoinDesk. “With market-making, generally you don’t want to be holding onto risk for that long. What I mean by that is more than 30 seconds. So we’re usually flat on that exposure at any given time. And then, for very short periods of time, we’ll have short exposure in a number of different coins, but we’ll hedge that off very quickly.”

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Galois Capital opened cryptocurrency futures and swaps in April 2019 and long-short trades in August 2019 to more cheaply hedge spot exposure and arbitrage price disparities with derivatives, the investor letter says. It will also initiate cryptocurrency options trades on the Deribit exchange in the fourth quarter of this year, but the plans are tentative to exercise caution over low and therefore risky options volume. Deribit alone trades less than $50 million a day.

Galois Capital has done some notable long-short trades, such as going long bitcoin at $3,750 in December 2018 and buying the FTX crypto-derivatives exchange’s FTT coin at $0.10 in April 2019, according to the letter.

The firm took the optimistic bitcoin position at a market low on the view that industry-wide hedge fund investment redemptions had subsided, that a crash in initial coin offerings — virtual currency investment structures highly correlated to bitcoin — had bottomed out and that legal measures surrounding Mt. Gox bankruptcy proceedings had abated bitcoin selling pressure.

And, due to a close relationship with FTX’s parent company Alameda Research, Galois Capital saw FTT as undervalued at the time of its investment. The coin sale was “very rushed and did not tap all of the available capital” despite “a surplus of demand on the sidelines,” the investor letter says. Galois Capital exited the FTT long position at a price between $0.80 and $1.94 while retaining some holdings of the coin.

In the coming year, Galois Capital will trade against its own market-maker, combining its liquidity and hedge fund services. Borrowed from traditional prop trading shops Two Sigma, Jump Trading and Tower Research, the strategy is aimed at improving long-short trading efficiency. According to the letter, Galois long-short traders have accidentally taken opposite positions and strive to trade independently without confusing each other’s profits and losses.

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