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Mutual fund legend Bill Miller told CNBC Friday that the risks of bitcoin going to zero are “lower than they’ve ever been before” and predicted more institutional investment in the cryptocurrency.

“The bitcoin story is very easy, it’s supply and demand,” Miller said. “Bitcoin’s supply is growing around 2.5% a year and the demand is growing faster than that.”

When he was managing the Legg Mason Capital Management Value Trust Fund, Miller beat the S&P 500 for 15 years. He’s now the chief investment officer of Miller Value Partners. In December 2017, Miller revealed that his MVP1 hedge fund had half of its investments in bitcoin. 

Related: Market Wrap: Bitcoin Loses Steam at $15.9K; Over 600K ETH Yanked From DeFi

On Friday, Miller warned of inflation “coming back” with the Federal Reserve “gunning the money supply” and future fiscal relief coming from Congress. 

Following MicroStrategy’s purchase of $425 million in bitcoin, Square’s $50 million bitcoin investment and PayPal’s support of crypto buying and selling on its platform, Miller said every major investment bank and high net worth firm will eventually have exposure to bitcoin or commodities like gold. He added that bitcoin has performed well over the past three-, five- and 10-year periods. 

Miller, who serves on the investment committee for the endowment of Baltimore-based Johns Hopkins University, said that the endowment’s chief investment officer told him that “everybody is going to want to own at least some bitcoin” because of its “asymmetric properties.” 

“[The endowment] may never own bitcoin,” Miller said. Yet, “for a college endowment that’s a bold statement,” he added.

Related Stories

• First Mover: Resistance Is Futile as Bitcoin Breaches $15K, Crypto Gets Greedy
• As Bitcoin Surges, Google Searches Suggest Little FOMO Among Retail Investors
• Market Wrap: Bitcoin Surpasses $15.3K; Ether Up 210% in 2020

A bitcoin rally to new 2020 highs has been slowed by lower spot volume. Meanwhile, some ether investors are moving capital out of DeFi.

• Bitcoin (BTC) trading around $15,502 as of 21:00 UTC (4 p.m. ET). Gaining 2.6% over the previous 24 hours.
• Bitcoin’s 24-hour range: $15,190-$15,934
• BTC near its 10-day moving average but above the 50-day, a sideways signal for market technicians.

Bitcoin’s price rise stalled Friday after making gains over the past 24 hours, most notably going as high as $15,934, according to CoinDesk 20 data. It was trading at $15,502 as of press time. 

“BTC has been bullish for the last four weeks, incredibly rallying from $10,000 to $15,000,” noted Ian Balina, chief executive officer of analysis firm Token Metrics. “This month’s rally is similar to its previous big rally back in 2017 when BTC rallied from $6,000 to almost $20,000 over November and December.”

Related: Licensed Swiss Crypto Bank Launches Tezos Trading and Staking

The last time bitcoin’s price was at these levels was back on Jan. 7, 2018, when its 24-hour low was $15,632, a descent from that day’s $16,861 high during an overall market sell-off, according to the CoinDesk 20. 

“The next resistance level is between $16,000 and $17,000,” Balina added. “If it flies by that, it can retest its all-time high and possibly move above $20,000.”

Read More: As Bitcoin Surges, Google Searches Suggest Little FOMO Among Retail 

A bitcoin price push higher will likely require the return of higher-than-average spot volumes. Volumes for Friday were much lower than Thursday, which at $1,569,081,137 was the highest daily average volume day since July 27. On that summer day it hit $1,579,784,44 on major USD/BTC spot exchanges. As of press time, Friday’s spot exchange volume was at $1,064,734,786. 

Related: First Mover: Resistance Is Futile as Bitcoin Breaches $15K, Crypto Gets Greedy

Futures open interest for bitcoin Thursday matched a record high from Aug. 17. “Longer-term trends remain very bullish. Bitcoin futures aggregate open interest is at an all-time high at $5.7 billion and perpetual swaps funding rates are trending up,” noted Jason Lau, chief operating officer of San Francisco-based exchange OKCoin. 

“The minor pullback today is normal and healthy,” Lau told CoinDesk. “In the past, bitcoin has experienced strong, quick moves and retracted much more. I’d look to see if BTC can settle in and establish a base before making another move upwards.”

Bitcoin’s dominance, a measure of the world’s oldest cryptocurrency’s market cap as a percentage of total crypto assets, is starting to dip. After a steady October and early November rise to 65.5%, it dropped on Friday.

Jean-Marc Bonnefous, managing partner of investment firm Tellurian Capital, said bitcoin might be losing some momentum after its stratospheric price rise, adding that some investors make take profits and plow them into alternative cryptocurrencies, or altcoins. 

“BTC has already done quite a bit of work to the upside and will need to take a breather,” Bonnefous said. “At some point the rotation will occur again from BTC to these heavily sold alt tokens.”

Ether locked in DeFi drops

The second-largest cryptocurrency by market capitalization, ether (ETH), was up Friday, trading around $442 and climbing 7% in 24 hours as of 21:00 UTC (4:00 p.m. ET). 

Read More: Vitalik Buterin Sends $1.4M of Ether in Preparation for Ethereum 2.0 Staking

Since Oct. 20, when the amount of ether locked in decentralized finance, or DeFI, was at 9,211,000 ETH, investors have been pulling the cryptocurrency out. Over 642,000 ETH was moved out of DeFi as of press time, down to 8,569,000 ETH, according to data aggregator DeFi Pulse. 

The trend follows a rocky past 30 days for ether locked in DeFi, as about one month ago the amount of ether into DeFi was at 8,423,000 ETH. Vishal Shah, an options trader and founder of derivatives venue Alpha5, says ether’s gyrations locked has to do with the ethereal nature of Ethereum’s DeFi products. 

“Most of the ETH locked in DeFi is to accumulate or accrue tokens that don’t have a tenable value,” Shah noted. “And as those values started to fall dramatically, the ‘APY’ [annual percentage yield] that served as the bait for participation in various pools naturally started dwindling.” 

Other markets

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

• orchid (OXT) + 12.8%
• tezos (XTZ) + 7.1%
• 0x (ZRX) + 7%

One notable loser:

• monero (XMR) – 0.65%

Equities:

• The Nikkei 225 ended the day climbing 0.91% as materials stocks boosted the index, including Kobe Steel, up 11%, and Nippon Sheet Glass Co., gaining 10%.
• Europe’s FTSE 100 closed flat, in the green 0.07% as investor sentiment was mixed between fresh lockdowns and the uncertainty over the U.S. presidential election.
• In the United States the S&P 500 gained 0.20% as investors await definitive election results amid better-than-expected unemployment numbers.

Read More: Square Reports Over $1B in Quarterly Bitcoin Revenue for First Time

Commodities:

• Oil was down 2.8%. Price per barrel of West Texas Intermediate crude: $37.39.
• Gold was in the green 0.14% and at $1,952 as of press time.

Treasurys:

• U.S. Treasury bond yields all climbed Friday. Yields, which move in the opposite direction as price, were up most on the two-year bond, jumping to 0.159 and in the green 9.6%.

Related Stories

• As Bitcoin Surges, Google Searches Suggest Little FOMO Among Retail Investors
• Market Wrap: Bitcoin Surpasses $15.3K; Ether Up 210% in 2020

On Election Day, Californians chose not only the direction of their government but also the direction of some of the laws that government will administer. With 56% of voters approving it thus far, Proposition 24, also known as the California Privacy Rights Act (CPRA), is on its way to replacing key components of the California Consumer Privacy Act (CCPA), one of the more robust data privacy laws in the country.

While the CPRA is not without controversy, it raises the stakes for non-compliance and encourages businesses, including cryptocurrency exchanges, to take additional steps to respect user privacy. It also has the potential to bring those businesses closer to complying with the General Data Protection Act, the European Union privacy law that goes further than the CPRA. 

“The silver lining is that an exchange that has been attempting to achieve compliance under the GDPR (e.g., employing accepted hashing techniques to effectuate data ‘deletions’) could use some of those same measures to demonstrate compliance under the CPRA,” said Steven Blickensderfer, a technology and privacy lawyer at the firm Carlton Fields. “In effect, the CPRA may force exchanges to look globally and think holistically about their privacy compliance, which may not be a bad thing after all.”

The CCPA vs. the CPRA

Related: Federal Reserve Keeps Rates Close to Zero, Maintains Asset Purchases

The CCPA was the first law of its kind in the United States. The law empowers California consumers to know when private companies collect, share or sell their data and to stop that sale if necessary. It applies to companies with annual gross revenue of more than $25 million or that possess information on 50,000 or more consumers. 

The CPRA adds additional protections for sensitive data including biometric data, location data and racial data, among others. A new state agency with a budget of $10 million will enforce the law, set to go into effect in 2023. Previously, this task had fallen to the arguably understaffed California Attorney General’s office. 

Cryptocurrency and Universal Basic Income advocate Andrew Yang, who ran for U.S. president in the Democratic primary, was the chair of the proposition’s advisory board. He said this could set the bar for other states. 

Read more: Privacy Laws Are Only as Effective as the Companies Implementing Them

Related: Wasabi Wallet 2.0 Will Offer Automatic CoinJoins by Default to Boost Privacy

“After this becomes the law in California, I believe other states are going to look up and say, ‘Why do Californians have all these data and privacy rights that we don’t have?’” Yang told ABC7 News. “So, as usual, California could end up leading the way.”

At least one crypto company supported the passage of the law. Kosala Hemachandra, the founder and CEO of Los Angeles-based MyEtherWallet (MEW), said the company is a big proponent of initiatives like Proposition 24, as well as laws that increase data privacy and give people control over how their data is used and distributed. 

“An increasingly digital world means that more and more personal data is available for companies to profit off of, and laws like this are a good step towards ensuring user privacy,” said Hemachandra in an email to CoinDesk. 

“MEW doesn’t collect data on our users, and we’re against the practice of mass data collection without the proper consent. User privacy will continue to become an increasingly important issue in the days and years to come, and it’ll continue to be a right that we uphold for our users.”

Not a data privacy panacea

The law is not without controversy, however. In a statement released in mid-October, the American Civil Liberties Union and several of its California chapters opposed the proposition. 

“Proposition 24 won’t strengthen privacy rights for Californians,” wrote Jacob Snow and Chris Conley of the Northern California ACLU. “Instead, it will undermine protections in current law and increase the burden on people to protect themselves – in ways that will disproportionately harm poor people and people of color.”

The CPRA allows people to manually opt out of data collection, which they would have to do for the relevant digital services they use, placing that burden on the consumer rather than the companies. 

In July, the Electronic Frontier Foundation (EFF) wrote about its concerns that the law could result in expanded “pay for privacy” schemes. 

Read more: Downvoted: Security Researchers Slam Voatz Over Stance on White-Hat Hackers

“Specifically, the initiative would exempt ‘loyalty clubs’ from the CCPA’s existing limit on businesses charging different prices to consumers who exercise their privacy rights,” wrote Lee Tien, Adam Schwartz and Hayley Tsukayama.

Effectively, this means that companies could charge people more if they asserted their privacy rights. One example of this could be a media company offering a free subscription if customers chose not to exert their rights. Privacy advocates contend this would disproportionately impact low-income consumers. 

The impact going forward

Criticism of the Prop. 24 deserves further consideration and action, but Blickensderfer laid out a few benefits to the law when it’s implemented. 

“The creation of an agency dedicated to enforcing California’s consumer privacy laws is a potential game-changer,” he said. 

One criticism of the CCPA by privacy advocates is the California Attorney General’s office is spread too thin and not in a position to enforce the law effectively, according to Blickensderfer. Having a dedicated privacy watchdog in the U.S. would change that and mirror how privacy is enforced in Europe and other parts of the world. 

It also introduces another, more proactive model of enforcement aside from “private causes of action,” he said. A private right of action allows an individual to sue for relief from injuries caused by a violation of a legal requirement, but only if harm or injuries have already occured. 

Also, the CPRA brings California a few steps closer to Europe’s GDPR. 

“In fact, I would not be surprised if eventually we see efforts made to determine that California is an adequate jurisdiction under the GDPR for purposes of approving cross-border transfers from the European Economic Area to California,” he said. 

Read more: EU Privacy Shield Ruling Is an Opportunity and Conundrum for Decentralized Tech

As CoinDesk has previously reported, in July the Court of Justice of the European Union (CJEU) struck down a key data-sharing agreement between the United States and European Union. 

The 2016 agreement, known as the Privacy Shield, let American companies self-certify they are complying with data privacy laws such as the GDPR. The ruling focused in large part on the lack of a federal privacy law in the U.S., and the ways the U.S. security agencies conduct extensive surveillance of individuals including their data.   

“That could be a potential boon for business in California, as everyone is still struggling to figure out the legality of such transfers,” said Blickensderfer. 

Businesses will have to likely go beyond CCPA compliance and further in the direction of the GDPR to be compliant with CPRA. With 2023 set for implementation, though, there are a couple of years to work this out. But that doesn’t mean there is any reason to delay. 

“As in Europe, once enforcement starts the new regulator will likely have little compassion for businesses that have had two years to come into compliance,” said Blickensderfer 

Related Stories

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Figure Technologies has applied for a national bank charter that would simplify compliance and cut costs for the blockchain-based consumer lending startup.

• Former SoFi executive Mike Cagney’s fintech company is seeking the Office of the Comptroller of the Currency’s approval to offer its home equity loans and financing services across the U.S.
• Currently, Figure has 96 licenses from 49 states, and CEO Cagney says that without the national charter it could end up with 200 licenses by next year. Being regulated as a national bank would replace that expensive hodgepodge with a single overseer.
• Figure’s Provenance platform is the tech unicorn’s claim to fame. The company says the blockchain platform is far more efficient at processing loans than traditional mechanisms.
• In March, Figure conducted on-chain every step of a $150 million home equity loan securitization. 
• SoFi, Cagney’s previous company, was approved for a national bank charter by the OCC last month. It was the online lender’s second attempt; the fintech tried unsuccessfully when Cagney still ran it a few years ago. 

Read more: Figure Technologies Securitizes $150M of Home Equity Loans on Blockchain

UPDATE (Nov. 6, 20:20 UTC): Added links and background about CEO’s last venture.

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Red-hot spot markets are primarily fueling bitcoin’s recent rally as the leading cryptocurrency trades at three-year highs around $15,500, suggesting the bull market may have room to continue.

Unlike previously rallies, derivatives markets are playing a markedly less prominent role, demonstrated by mild liquidation volumes. 

The presence of derivatives in bitcoin’s ongoing rally is “muted in comparison to previous run-ups,” said Matt Kaye, managing partner at Santa Monica-based Blockhead Capital. Talking to CoinDesk, Kaye said, “The market is clearly spot-dominated, and it appears that most of the bidding is coming out of the U.S.,” continuing a trend CoinDesk reported in May.

Related: Bitcoin’s Rivalry With Gold Plus Millennial Interest Gives It ‘Considerable’ Upside Potential: JPMorgan

On Thursday, BitMEX, a cryptocurrency derivatives exchange known for attracting unorthodox, high-leverage traders, reported $54 million in liquidated bitcoin futures contracts during the most recent rally, well below the still mild liquidation volume of $75 million reported on Oct. 21 when bitcoin reached then-new yearly highs, breaking above $13,000, according to Skew.

Large liquidations might not happen until the leading cryptocurrency breaks above its all-time highs just below $20,000, said Kyle Davies, co-founder of Three Arrows Capital, in a direct message with CoinDesk. “Frankly, there’s not much leverage in the market now anyways,” he said. 

Significant price movements typically trigger large-scale liquidations in characteristically overleveraged cryptocurrency futures markets. But the mild liquidations throughout bitcoin’s recent rally signals that the typically prominent derivatives markets has taken a back seat and the spot market has the wheel. 

Read more: Bitcoin’s Rivalry With Gold Plus Millennial Interest Gives It ‘Considerable’ Upside Potential: JPMorgan

Related: O(1) Labs Raises $10.9M More for Lightweight Mina Protocol

Corroborating the quietness of derivatives markets amid bitcoin’s soaring price action is that less than $500 million in bitcoin futures positions had been liquidated in the past 24 hours, as of 14:35 UTC Friday, across seven leading trading platforms as bitcoin neared $16,000. The largest reported liquidation of $5.97 million happened on BitMEX, according to derivatives data aggregator Bybt.

Regulatory troubles weathered by leading leveraged trading exchanges including BitMEX, OKEx and Huobi explain the subdued influence that derivatives markets play in bitcoin’s current rally, according to Davies. 

That liquidation volumes are low relative to bitcoin’s price movements could be an encouraging sign for bitcoin bulls, according to Aditya Das, cryptocurrency market analyst at Brave New Coin.

“The quiet funding rate and relatively low number of liquidations could be read as a positive sign that this rally may have legs and is not close to overheating because of speculators,” he told CoinDesk in a direct message. 

The market could also be signaling that futures traders simply “missed out on the big move,” Das added. 

Related Stories

• Futures Traders Aren’t as Bullish This Time Around as Bitcoin Price Revisits $12,000, Data Indicates
• US-Regulated Bitcoin Derivatives Market Bitnomial Raises $11.6M in Electric Capital-led Series B

The Canadian Revenue Agency is asking a judge to force cryptocurrency exchange Coinsquare to hand over seven years of client data in a legal action that could help it audit Canadians for unreported crypto gains.

• CRA wants to check whether Coinsquare’s users “complied” with their tax reporting obligations, according to the National Post.
• Canada’s tax collectors appear to be testing a tactic their U.S. peers at the Internal Revenue Service deployed against Coinbase: pursue crypto customer records (with the help of the courts).
• However, CRA’s demands for data on all customers dating back to 2013 is far larger than the IRS’ comparatively limited request for documents on high-spending clients, a play that ultimately netted some 13,000 records.
• Coinsquare CEO Stacey Hoisak told the National Post her exchange is still deciding how to react in response to the CRA’s September demand.
• It was not immediately clear if CRA’s inquiry is related to the Ontario Securities Commission’s July crackdown on Coinsquare’s reported fake trading volume.
• Coinsquare’s top brass resigned and paid hefty fines in a settlement where they admitted to orchestrating a wash trading operation.

Related Stories

• INX to List on Canadian Securities Exchange Following IPO
• Blockchain Firm Figment Raises $2.5M in Funding Round Led by Bonfire Ventures
• Tax Payers Needn’t Disclose Merely Holding Crypto: IRS Draft 2020 Guidance
• PayPal Cuts Service to Crypto-Funded Domain Registrar Hosting Right-Wing Sites

Cash App generated over $1 billion in bitcoin revenues in Q3. Vitalik Buterin sent 3,200 ETH to Ethereum 2.0’s deposit contract. Google search data shows little “FOMO” amid the current market bull run.

Top shelf

Monster quarter
Cash App, the mobile payment service of Square (helmed by Twitter CEO Jack Dorsey), generated $1.63 billion in bitcoin revenue and $32 million in bitcoin gross profit for Square during the third quarter of 2020, according to the company’s Q3 investor letter. This is 11 times more in bitcoin revenue than Q2’s $875 million, when Square profited $17 million from selling bitcoin. Still, Square’s bitcoin business has relatively tame profits for a money services business, with profit margins shy of 2%. In an earnings call, Dorsey said, “We believe [bitcoin] will be the native currency of the internet, and help people thrive around the world and the economy.”

Buterin’s stake
Ethereum founder Vitalik Buterin has sent 3,200 ether, worth around $1.4 million, to Ethereum 2.0’s newly launched deposit contract. Ethereum 2.0 is making progress on its transition to proof-of-stake, which will progress to the next phase of readiness once 524,288 ether are staked in the contract. The deposit contract now holds 38,693 ether, worth some $17 million. Industry publication TrustedNodes reports that Buterin’s “VB2” address sent 100 transactions in total.

Related: Money Reimagined: Crypto-Informed Ideas for the Future of Government

VASP
South Korea’s Financial Services Commission (FSC) is seeking legal amendments that would make it mandatory for virtual asset service providers (VASPs) – generally meaning custodians, wallet providers or brokerages – within the country to report the names of their customers. The change is part of a larger sweep affecting most money services (from gift cards to electronically registered stocks) to help guard against money laundering. If approved, VASPs will be required to use real-name accounts in their financial transactions with customers and implement other data security measures. The rules are aligned with FATF’s “travel rule” recommendations.

Identity
Several Spanish companies, including Banco Santander, have grouped together to develop a “self-managed” digital identity system using blockchain technology. The organization, Dalion, said the “secure and reliable” ID platform could be used in car rentals, insurance and loan applications, and sign-ups at utility providers. Designed to give users control over personal information it also streamlines “tedious” form filling by automatically providing the validated data required by the requesting entity. Using the Quorum blockchain, the group said, will ensure that data has not been altered. The system could roll out in May 2021.

Quick bites

• Buggy code in a Compound Finance fork froze $1 million in ethereum tokens. (CoinDesk)
• The United States Department of Justice (DOJ) is pursuing antitrust action against Visa’s planned $5.3 billion acquisition of fintech, and crypto-friendly, firm Plaid. (CoinDesk)
• “Crypto Twitter is not as influential as it likes to think, according to researchers at BDCenter.” (Decrypt)
• Grayscale’s Ethereum Trust hits $1 billion in assets under management. (The Block)
• Andy Edstrom: Financial advisors, Bitcoin is the next Amazon. (CoinDesk)

Market intel

No FOMO
Despite climbing to levels last seen in the 2017 bitcoin bubble, web search data suggest little crypto “FOMO” among the masses. After getting close to $16,000 yesterday, bitcoin is still trading in the mid-$15K range, nearly 120% up on a year-to-date basis. Google Trends, a barometer used to gauge general interest in trending topics, is currently returning a value of 10 for the worldwide search query “bitcoin price” – significantly lower than the value of 93 observed in early December 2017 following bitcoin’s record break above $15,000.

At stake

Gradually, then suddenly
CoinDesk’s head of research, Noelle Acheson, thinks crypto is still in the “gradual” phase of “gradually, then suddenly.” Reading the tea leaves of headlines – from PayPal’s crypto play to Microstrategy’s bitcoin buy – in October can create the image that mass adoption is right around the corner. The truth is, crypto is still maturing.

Related: First Mover: Resistance Is Futile as Bitcoin Breaches $15K, Crypto Gets Greedy

In the latest CoinDesk Monthly Review (available for download here), the team looks back at some key Bitcoin and Ethereum performance metrics from last month. What was found is gathering momentum, and an ever clearer sense of real use cases, albeit gradually.

Notably, Ethereum’s volatility, transaction count and fees have cooled – after a summer that saw the second-largest blockchain “flippen” Bitcoin in many of those key measures.

In September, ETH’s 30-day volatility (annualized) spiked approximately 110%. While bitcoin’s volatility flattened throughout October, ether’s declined – a signal that “the ETH market is still more immature than that of BTC,” Acheson and CoinDesk research analyst Christine Kim write.

Further, average transaction fees on Ethereum fell over 80% in October, retracing September’s sharp increase. A similar drop in miner revenues also occurred, as dapp activity cooled.

“This is a positive sign for the network, which in recent months has been pushed to its limits by the splashy debuts of new DeFi assets such as COMP, SUSHI and others,” they write.

It’s likely that many more rises and falls are in store before Ethereum “suddenly” takes hold.

Who won #CryptoTwitter? Related Stories

• Blockchain Bites: Bitcoin at $15K, $1B Silk Road Bust
• First Mover: Bitcoin Likes Biden (and Fed’s Powell) as Price Approaches $15K

Publicly traded mining company Hive Blockchain purchased and immediately deployed its largest batch of new ASIC miners Friday, bringing 1,240 MicroBT WhatsMiner M30S machines online.

• The firm’s aggregate operating hashrate nearly doubles with the addition of the new M30S miners, according to a statement, in what is the largest single purchase of new machines for the Vancouver-based company.
• Hive’s current hash power has almost doubled from 116 peta hash per second (PH/s) to 229 PH/s, thanks to the new machines. A total operating hash power of 1,000 PH/s is the company’s goal within the next 12 months, according to Frank Holmes, interim executive chairman.
• Amid the ongoing coronavirus pandemic, shipping and delivery logistics for miner manufacturers remains disrupted, affecting Hive and buyers. Hive is still waiting on the full delivery of 200 S17e miners, which were delayed by production issues at ASIC-manufacturer Bitmain.
• Hive’s expansion comes as bitcoin is trading at a three-year high of $15,500, up 116% this year.
• The expected profitability of these new machines, moreover, is boosted by the significant drop in mining difficulty Tuesday despite significant increase in bitcoin’s price, as CoinDesk previously reported.
• Year to date, shares of Hive, which had Q1 net income of $1.8 million, have gained 488 percent, currently trading at $0.53. 

Related Stories

• US Bitcoin Mining Firm Layer1 in Legal Tussle Over Power Facility Ownership
• Bitcoin’s Mining Difficulty Sees Largest Percentage Drop in 9 Years
• Bitcoin Mining Firm Hut 8 Appoints Jaime Leverton as CEO
• Bitcoin Miners Saw 8% Revenue Increase in October

A group of central banks says the coronavirus pandemic is a driving force behind growing interest in national digital currencies.

• Governors of 26 central banks met in Russia to discuss the pandemic and its financial ramifications, according to a news release from the Bank of Russia on Friday.
• The “Central Bank Governors’ Club,” including institutions from the Central Asia, the Black Sea region and the Balkans, said the pandemic has brought growth to e-commerce and digital settlement technologies.
• As a result, that is one of the reasons financial regulators are increasingly interested in central bank digital currencies (CBDCs).
• Before launching a CBDC, however, a central bank should assess the impact it would have on monetary policy and financial stability, and after that develop procedures to “avoid and mitigate cyber risks,” the group agreed.
• Bank of Russia Governor Elvira Nabiullina, who also chaired the meeting, recently said her central bank’s fledgling digital ruble project was “promising” and that a pilot scheme was likely late next year.
• The group further said the economic crisis brought by COVID-19 will have “far-reaching global implications,” including a higher debt burden and “financial vulnerability.”
• Representatives from the International Monetary Fund, the World Economic Forum and the Bank for International Settlements were also present at the meeting.

Also read: In the CBDC Race, It’s Better to Be Last

Related Stories

• Vitalik Buterin Sends $1.4M of Ether in Preparation for Ethereum 2.0 Staking
• Someone Just Paid a $9,000 Fee for a $120 DeFi Transaction
• Crypto Exchange Coinbase Is on a Hiring Spree in Japan
• Cryptocurrency CEO Donated Second-Largest Amount to Joe Biden’s Campaign

Sygnum Bank, a digital assets company licensed in Switzerland, has launched services for Tezos, its first listing of a proof-of-stake blockchain token.

• Announcing the news Friday in a blog post, Sygnum said it now offers trading, staking and custody for tezos (XTZ).
• Users can earn rewards by staking XTZ with no minimum period and interest said to be “up to 5%” annually.
• The company is regulated as a bank by the Swiss Financial Market Supervisory Authority (FINMA), and offers a range of digital asset services with a focus on the B2B market.
• “Sygnum’s offering of Tezos staking services serves as validation of the network’s security and longevity, and is yet another step on the path towards major institutional and enterprise adoption,” said David Fuchs, head of enterprise adoption EMEA at the Tezos Foundation.
• Also today, Sygnum announced it tapped custody services from Taurus Group to keep deposits secure.

Also read: Swiss Arm of Russia’s Gazprombank Launches Institutional Bitcoin Offerings

Related Stories

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• Sygnum Bank Now Stores Digital Assets With Taurus Group
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• UK Police Find no Crime in Alleged $3M Crypto ‘Staking’ Scam

Bitcoin was lower, pausing after after a three-day rally that saw prices approach $16,000, their highest since early 2018. 

The recent rally left the largest cryptocurrency up 116% year to date, and some bullish digital-asset market analysts were already looking at even higher levels. Denis Vinokourov, head of research at the crypto prime broker Bequant, said in an email there’s the potential for a squeeze in the options market to push up prices in the next several days. 

“This, coupled with continued uncertainty around U.S. election results and the economic fallout from the Covid pandemic’s resurgence, could see us push towards $17,000,” he said. 

Related: Vitalik Buterin Sends $1.4M of Ether in Preparation for Ethereum 2.0 Staking

In traditional markets, U.S. futures were lower ahead of a closely-watched government report due out Friday on employment trends in October. Gold rose 0.3% to $1,956 an ounce. 

Market Moves

As bitcoin shot above $15,000, analysts on Thursday were reaching back into the cryptocurrency’s 11-year history for clues on what comes next. 

Prices have already doubled this year, just as they did in 2019, and bitcoin is now being openly discussed by global banks like Deutsche Bank as the world’s best-performing asset. A lot of observers say the price movements are random and not necessarily linked to broad macroeconomic trends. While the relationship remains on the weaker side, for most of this year, correlation between the cryptocurrency’s price movements and traditional markets have been increasing.

And the investment narrative that bitcoin fund marketeers are pitching looks pretty strong at the moment: Not only has the cryptocurrency been cast by many bulls as the future of money and perhaps a threat to the existing financial system, but it’s also positioned as an inflation hedge at a time when the Federal Reserve and other central banks are printing trillions of dollars of money to stimulate markets and economies, with few apparent signs of any slowdown. 

Related: As Bitcoin Surges, Google Searches Suggest Little FOMO Among Retail Investors

Now there’s a belief among many traders that the fear of missing out, or FOMO, could drive faster adoption of cryptocurrencies by both retail and institutional investors – and rapidly drive prices to a new record high above $20,000. 

That’s where the history lesson comes in. As some analysts have been signaling this week, bitcoin prices have now entered a territory they’ve so rarely visited before that investors reading price-chart patterns – a widely followed practice among crypto traders known as “technical analysis” – see easy-to-spot stopping points between $15,000 and $20,000. 

“The technical setup has been building for a while now, and it has finally broken through,” Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics, told subscribers in an email.

The screen grab above, from the digital-asset-market analysis firm Messari, shows that bitcoin had previously traded just 20 days above the $15,000 price level, all of them in 2017. 

And it was powerful indeed: Once the $15,000 level was breached, bitcoin quickly shot up to the all-time high near $20,000. 

Matt Blom, head of sales and trading for the digital-asset firm Diginex, called it a “price vacuum.” So the speculation now is that a repeat might be in the cards.

This all might be wishful thinking from traders who analysts and investors who really have no more insight into the future than anyone else and are just lucky enough to be in digital-asset markets at a time when the fast-growing ecosystem seems to be one of the few sectors that’s truly thriving.

A slow, steady advance might be more convincing to newcomers and the “crypto curious” than a quick march to the top that’s quickly reversed. Whatever the case, the prevailing mood in the market is pushing toward “extreme greed” from “fear” just a month ago. 

“The case for bitcoin gets stronger every day,” according to Messari. “Resistance is futile.” 

If there even is any.  

Bitcoin watch

Web search data suggests popular interest in bitcoin remains at normal levels, despite a sharp price rally to near $16,000.
 

The top cryptocurrency has chalked up a nearly 50% gain in the past four weeks to trade as high as $15,971 early Friday, a level last seen during the bull market frenzy between December 2017 and January 2018.

Some observers say the rally is now being driven higher by retail greed and fear of missing out, known as FOMO. However, Google data suggests otherwise.

Google Trends, a barometer used to gauge general interest in trending topics, is currently returning a value of 10 for the worldwide search query “bitcoin price.”

That’s significantly lower than the value of 93 observed in early December 2017 following bitcoin’s record break above $15,000.

The current reading is also lower than the peak of 19 observed in the second week of May when bitcoin underwent its third mining reward “halving.”

Google’s data suggests that retail investors are showing calm over bitcoin’s recent rally and the market is far from being in a state of bull frenzy.

With popular interest still relatively low, it seems safe to say that FOMO is yet to take hold of the market and the ongoing institutional-driven rally has legs.

– Omkar Godbole

Read More: As Bitcoin Surges, Google Searches Suggest Little FOMO Among Retail Investors

What’s hot

Ethereum founder Vitalik Buterin sends $1.4M of ether in preparation for second-biggest blockchain network’s “2.0” upgrade to staking system (CoinDesk) 

Jack Dorsey’s Cash App generated an eye watering $1.63 billion in bitcoin revenue during Q3 of 2020 (CoinDesk)

Buggy code in this Compound Finance fork just froze $1M in Ethereum tokens (CoinDesk) 

Fidelity launches engineering hiring initiative to build out crypto trade and custody services (The Block)

Bitcoin “accumulation addresses” rise to record high of more than 519K (CoinDesk) 

South Korean crypto firms must disclose users’ identities under planned law change (CoinDesk) 

Lightning Network operators are bracing for the curious new users that usually come with a bull run (CoinDesk) 

Bitcoin is the new Amazon (CoinDesk Opinion) 

Swiss fintech firm Taurus wins Sygnum Bank as client of digital-asset custody services (CoinDesk)  

Ethereum transaction fees ebb as DeFi fever subsides (CoinDesk Research):

Analogs The latest on the economy and traditional finance

U.S. October employment report expected to show gain in nonfarm payrolls of 530K, slowing from September’s 661K (CNBC)  

Australian regulator reduces the assets banks must hold in a central-bank committed facility by $25B, acknowledging that institutions are increasingly buying government bonds considered low-risk to meet the threshold (Reuters)

U.S. jobless claims remain elevated, at higher-than-expected 751K for most recent week (St. Louis Fed)

Federal Reserve holds rates close to zero, maintains asset purchases, argues for more fiscal support, pledges more monetary support if needed (CoinDesk) 

Tweet of the Day

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Ethereum founder Vitalik Buterin has sent his first ether for staking on the next iteration of the blockchain network.

• Buterin’s “VB2” address sent 100 transactions for 32 ether each, all in totaling 3,200 units of the cryptocurrency, as reported by TrustedNodes. The amount is worth around $1.4 million at press time.
• The transactions (visible here) were sent to Ethereum 2.0’s newly launched deposit contract, which went live Wednesday as a means for network participants to move funds from the current proof-of-work blockchain to the soon-to-launch proof-of-stake (PoS) blockchain.
• Since then, public Ethereum participants have been able to deposit the minimum 32 ether required to stake on Eth 2.0.
• The deposit contract now holds 38,693 ether, worth some $17 million.
• Staking is a way of supporting a PoS blockchain network by committing funds for a period of time in return for rewards. PoS networks do not rely on mining, as do the existing Ethereum network and Bitcoin.
• Ethereum 2.0 is expected to launch soon, possibly in early December, after the date was brought back from Bitcoin’s launch anniversary on Jan. 1.
• The “Genesis” launch requires 16,384 validators to deposited funds equivalent to 524,288 ether into the contract. At that point the Beacon chain, the core of Ethereum 2.0, will go live.

Also read: Ethereum’s Vitalik Buterin Calls on Power Users to Move to Layer 2 Scaling

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Web search data suggests popular interest in bitcoin remains at normal levels, despite a sharp price rally to near $16,000.

• The top cryptocurrency has chalked up a nearly 50% gain in the past four weeks to trade as high as $15,971 earlier on Friday – a level last seen during the bull market frenzy between December 2017 and January 2018.
• Some observers say the rally is now being driven higher by retail greed and fear of missing out (FOMO). However, Google data suggests otherwise.
• Google Trends, a barometer used to gauge general interest in trending topics, is currently returning a value of 10 for the worldwide search query “bitcoin price”.
• That’s significantly lower than the value of 93 observed in early December 2017 following bitcoin’s record break above $15,000.
• The current reading is also lower than the peak of 19 observed in the second week of May when bitcoin underwent its third mining reward “halving.”
• Google’s data suggests that retail investors are showing calm over bitcoin’s recent rally and the market is far from being in a state of bull frenzy.
• Google search values typically rise following a major bull run as high street investors, who missed the early rise, often scan the internet for price information before joining the market.
• Google Trends provides access to a mostly unfiltered sample of actual search requests made to Google and scales their searches on a range of 0 to 100, according to the company.

• FOMO action is widely considered a sign of an asset nearing a major top as retailers are usually the last to join the market.
• But with popular interest still relatively low, it seems safe to say that FOMO is yet to take hold of the market and the ongoing institutional-driven rally has legs.
• Bitcoin peaked at a record high of $20,000 in mid-December 2017. At the same time, the worldwide search query “Bitcoin Price” touched 100 on Google Trends.
• It’s worth noting, though, that a high search value does not necessarily translate into increased buying pressure. Often investors search for information, but remain on the fence.
• At press time, bitcoin is trading near $15,588, representing a 118% gain on a year-to-date basis. The figure of $15,971 reached early Friday was a 33-month high.

Also read: Bitcoin Hits $15,000: Here Comes the FOMO

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South Korea’s Financial Services Commission (FSC) is seeking legal amendments that would make it mandatory for virtual asset service providers (VASPs) within the country to report the names of their customers.

According to a press release from the financial watchdog on Wednesday, a proposed update to the Act on Reporting and Using Specified Financial Transaction Information is aimed to help guard against money laundering.

The act defines VASPs as “business entities that engage in the purchase and sale of virtual assets, exchanges between virtual assets,” as well as custodians, digital wallet service providers and brokerages.

Related: Chinese Payments Giant UnionPay to Support Crypto Spending With New Virtual Card

The changes will mean that VASPs are required to use real-name accounts in their financial transactions with customers.

Additional measures require VASPs to open real-name accounts with financial institutions, keep customers’ deposits separate from their own and obtain a data security certification from the Korea Information Security Agency.

VASPs must have no record of fines or other penalties within the previous five years and must “manage” customers’ transaction records. An assessment of money-laundering risks associated with VASPs by financial institutions will also be required.

Virtual assets like cryptocurrencies aren’t the only assets being targeted: digital tokens that can’t be exchanged for fiat currencies, as well as e-money, electronically registered stocks, electric notes, commodities and more, will also be in the regulator’s sights.

Related: Group Backed by ING Bank, Fidelity and Standard Chartered Releases Crypto AML Tools

However, prepaid cards, mobile gift cards and electronic bonds are to be excluded from the scope of virtual assets.

Per a September recommendation by the Financial Action Task Force (FATF), the intergovernmental money-laundering watchdog, over 200 member regulators should profile cryptocurrency users to better identify criminal activity. It also set regulatory standards last summer, including the “travel rule,” stipulating that VASPs must pass on transaction information to other entities above a set value threshold.

The FSC’s proposal is designed to impose AML requirements on VASPs in accordance with the FATF’s recommendations and are not intended to adopt virtual assets into financial regulatory regimes, the watchdog said.

While currently in a period of public comment, the FSC expects to enforce the amendments from March 25, 2021.

See also: Is the Travel Rule Good or Bad for Crypto? Both

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Taurus Group, a Swiss fintech firm, has taken on Sygnum Bank as the latest client for its digital asset custody services.

Sygnum, which is one of two B2B players that hold banking licenses from the Swiss Financial Market Supervisory Authority (FINMA), will utilize Taurus’s Protect secure storage infrastructure, as well as leverage Taurus’ cluster of blockchain nodes, known as Taurus Explorer.

Taurus Explorer provides unified APIs and broadcasting algorithms to interface with multiple blockchain networks.

Related: Swiss Arm of Russia’s Gazprombank Launches Institutional Bitcoin Offerings

With the move, Sygnum joins Taurus’ other notable clients including banking and investment group Vontobel, Arab Bank Switzerland, SEBA Bank (the other B2B institution to hold a FINMA banking license in Switzerland), and Hypothekarbank Lenzburg.

Following the April 2020 announcement of a €10 million series A ($11.8 million), Taurus has expanded to become a major digital asset infrastructure provider for financial institutions in Europe, the firm said.

It offers a range of digital asset solutions including custody, brokerage, tokenization, asset management and B2B banking.

“We launched Taurus Group back in 2018 to answer a growing need for enterprise-grade custody solutions by financial industry players interested in digital assets,” said Taurus co-founder Jean-Philippe Aumasso. “Taurus is now one of the few companies in the world to master the full technology stack.”

Related: Franklin Templeton Joins Series A Round for Crypto Custodian Curv

See also: Crypto Native SEBA Bank Offers Asset Tokenization Service With TokenSoft Tie-Up

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Bitcoin is hitting fresh highs during a surge past $15,000 while investors may be overlooking the upside of ether in 2020.

• Bitcoin (BTC) trading around $15,087 as of 21:00 UTC (4 p.m. ET). Gaining 7.7% over the previous 24 hours.
• Bitcoin’s 24-hour range: $14,005-$15,306
• BTC above its 10-day and 50-day moving averages, a bullish signal for market technicians.

The price of bitcoin jumped Thursday, going up to $15,306 around 15:50 UTC (10:50 a.m. ET), according to CoinDesk 20 data, taking it to its highest price point since Jan. 8, 2018, when bitcoin’s high was $15,360. It has dipped since, settling at $15,087 as of press time. 

Read More: Bitcoin Breaks $15K as Investor Numbers Peak

Related: Square Reports $1B in Quarterly Bitcoin Revenue for First Time: Q3 Earnings

“Bitcoin is above the psychological threshold of $15,000 today on strongly positive momentum, having cleared resistance from 2019,” said Katie Stockton, a technical analyst for Fairlead Strategies. 

Momentum, in the form of volume, was strong Thursday on leading USD/BTC spot exchanges. It was $1,233,248,261 as of press time, the highest since Oct. 21 when volume hit $1,273,812,127.

Stockton suspects momentum may subside, which may cause a price pullback. “There are some signs of short-term upside exhaustion from an overbought/oversold perspective supporting a few weeks of consolidation, but we would see this as healthy from a technical perspective.”

Analysts still see bitcoin as an asset to bet on in uncertain times over the long term. 

Related: Bitcoin Hits $15,000: Here Comes the FOMO

“The U.S. is going to push the spending button again no matter who wins the White House,” noted Henrik Kugelberg. Next year “will probably see more individual support payments all over the world, and some of that money is inevitably gonna be placed in bitcoin.”  

“The macroeconomic situation in the U.S. and elsewhere is far more uncertain, and concerns about COVID-19’s resurgence sending the economy back into a tailspin are not entirely unfounded,” noted Guy Hirsch, U.S. managing director at multi-asset brokerage eToro. “All in all, it feels like a perfect storm for retail [bitcoin] adoption that’s coming right at the beginning of an expected wave of institutional capital,” he added. While most markets are up Thursday along with crypto, the U.S. Dollar Index, a measure of the greenback versus a basket of other fiat currencies, is in the red 0.88% Thursday as of press time, down 1.6% since the start of November. 

In the futures market, open interest for bitcoin contracts was back at $5.4 billion, with CME’s $804 million taking third place of all venues as institutional investors poured money in. The CME is a U.S.-regulated exchange for larger investors and brokerages, therefore its open interest growth is a signal large players are placing hedges and directional positions as part of some sort of bitcoin strategy. 

“Interestingly, while aggregate futures open interest (OI) has risen back to $5.4 billion (late October highs), the increments were very steady and managed,” noted Denis Vinokourov, head of research at digital asset prime broker Bequant. “This suggests that the more regulated entities that operate in the current ecosystem are taking a more pragmatic approach to the current FOMO.“

Ether outperforming bitcoin

The second-largest cryptocurrency by market capitalization, ether (ETH), was up Thursday, trading around $414 and climbing 3.4% in 24 hours as of 21:00 UTC (4:00 p.m. ET). 

Read More: Someone Just Paid a $9,000 Fee for a $120 DeFi Transaction

Bitcoin boosters like to talk about its 2020 price gains as a hedge against an uncertain global economy. However, ether has done even better than bitcoin so far this year, up 210% versus bitcoin’s 95% gains. 

John Willock, chief executive officer of crypto liquidity provider Tritum, said investors like ether’s potential as both a hedge and a bet on the possible future of finance. 

“Ether holds similar qualities to bitcoin as a general economic uncertainty hedge but also has the added value of utility with the network it powers,” Willock said. “With the long-anticipated forthcoming ETH 2.0 proof-of-stake upgrade, it will, from an investment perspective, become a yield-bearing instrument which has much broader appeal.”

Other markets

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

• stellar (XLM) + 8.8%
• 0x (ZRX) + 7.8%
• litecoin (LTC) + 7.6%

Read More: US Seized More Than $1B in Silk Road-Linked Bitcoins, Seeks Forfeiture

Equities:

• The Nikkei 225 ended the day climbing 1.7% as investors in Asia digested the possibility of a Biden presidency in the U.S. that is more lenient on Chinese trade issues.
• Europe’s FTSE 100 closed in the green 0.39% as the U.K.’s central bank kept interest rates steady amid fresh lockdowns.
• In the United States the S&P 500 gained 2% as tech stocks climbed and investors felt confident final presidential election results were imminent.

Commodities:

• Oil was down 1.5%. Price per barrel of West Texas Intermediate crude: $38.52.
• Gold was in the green 2.5% and at $1,950 as of press time.

Treasurys:

• U.S. Treasury bond yields were mixed Thursday. Yields, which move in the opposite direction as price, were up most on the two-year bond, climbing to 0.149 and in the green 1.3%.

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It was a monster quarter for Square’s bitcoin business.

“Cash App generated $1.63 billion of bitcoin revenue and $32 million of bitcoin gross profit during the third quarter of 2020, up approximately 11x and 15x year over year, respectively,” the publicly traded payments firm wrote in its Q3 investor letter published Thursday at the market close.

For comparison, in the second quarter of 2020 the publicly traded payments company sold $875 million through its Cash App with $17 million in profit. Square sold $516 million in bitcoin over the entire year of 2019.

Related: Market Wrap: Bitcoin Surpasses $15.3K; Ether Up 210% in 2020

Among publicly traded companies, it could be said that Jack Dorsey’s Square has led the way in building bitcoin services, first piloting bitcoin purchases in its Cash App in late 2017. PayPal confirmed its rumored support for bitcoin, bitcoin cash, ether and litecoin just last month.

Square went one step further in Q3, however, officially adding bitcoin to its balance sheet rather than simply making it available to customers.

Square acknowledged its October announcement of a $50 million purchase of bitcoin as a treasury asset in its shareholder letter. Bitcoin’s price hovered under $11,000 at the time. As of this writing it has broken $15,000. 

“We announced two strategic investments,” Dorsey said during the earnings call. “The second was a $50 million investment in bitcoin, which we believe will be the native currency of the internet, and help people thrive around the world and the economy.”

Past earnings

Related: Bitcoin Hits $15,000: Here Comes the FOMO

In Q1 2020, Square brought in $306 million in revenue from selling bitcoin in the Cash App. It brought in $875 million in revenue in Q2. However, the margin on bitcoin sales is always quite small for Square. In late 2019, the company changed the way it supported its bitcoin business, shifting to a fee-based model, in order to make costs to buyers more transparent. 

Sales of bitcoin in Cash App earn Square a little under 2% in profit, which is a very thin margin compared to Square’s overall business, which runs at much higher margins. For example, the company overall made $597 million on $1.92 billion in revenue in the second quarter, or roughly a 31% profit.

Overall, the Cash App also delivers stronger profits. In the second quarter, it brought in $1.2 billion worth of revenue and $281 million in gross profit, according to its Q2 shareholder letter. 

Cash app’s profit in the third quarter hit $385 million.

Square’s bitcoin research arm, Square Crypto, recently announced a design grant meant to help make crypto wallets more user-friendly.

Read the full investor letter below:

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It was a monster quarter for Square’s bitcoin business.

“Cash App generated $1.63 billion of bitcoin revenue and $32 million of bitcoin gross profit during the third quarter of 2020, up approximately 11x and 15x year over year, respectively,” the publicly traded payments firm wrote in its Q3 investor letter published Thursday at the market close.

For comparison, in the second quarter of 2020 the publicly traded payments company sold $875 million through its Cash App with $17 million in profit. Square sold $516 million in bitcoin over the entire year of 2019.

Related: Market Wrap: Bitcoin Surpasses $15.3K; Ether Up 210% in 2020

Among publicly traded companies, it could be said that Jack Dorsey’s Square has led the way in building bitcoin services, first piloting bitcoin purchases in its Cash App in late 2017. PayPal confirmed its rumored support for bitcoin, bitcoin cash, ether and litecoin just last month.

Square went one step further in Q3, however, officially adding bitcoin to its balance sheet rather than simply making it available to customers.

Square acknowledged its October announcement of a $50 million purchase of bitcoin as a treasury asset in its shareholder letter. Bitcoin’s price hovered under $11,000 at the time. As of this writing it has broken $15,000. 

“The accounting rules for bitcoin will require us to recognize any decreases in market price below cost as an impairment charge, with no upward revisions when the market price increases until a sale,” the firm wrote Thursday.

Earnings breakdown

Related: Bitcoin Hits $15,000: Here Comes the FOMO

In Q1 2020, Square brought in $306 million in revenue from selling bitcoin in the Cash App. It brought in $875 million in revenue in Q2. However, the margin on bitcoin sales is always quite small for Square. In late 2019, the company changed the way it supported its bitcoin business, shifting to a fee-based model, in order to make costs to buyers more transparent. 

Sales of bitcoin in Cash App earn Square a little under 2% in profit, which is a very thin margin compared to Square’s overall business, which runs at much higher margins. For example, the company overall made $597 million on $1.92 billion in revenue in the second quarter, or roughly a 31% profit.

Overall, the Cash App also delivers stronger profits. In the second quarter, it brought in $1.2 billion worth of revenue and $281 million in gross profit, according to its Q2 shareholder letter. 

Cash app’s profit in the third quarter hit $385 million.

Square’s bitcoin research arm, Square Crypto, recently announced a design grant meant to help make crypto wallets more user-friendly.

Read the full investor letter below:

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Some $1 million in Ethereum tokens is locked in a new DeFi app after its developers made changes to the protocol’s interest rate smart contracts.

DeFi lending platform PercentFinance, a fork of Compound Finance, wrote in a blog post on Nov. 4 that “that some of [its] money markets experienced an issue that can result in permanent locking of user funds.” The team froze money markets specifically for USDC, ETH and wrapped bitcoin (WBTC).

A total of 446K USDC, 28 WBTC and 313 ETH , worth approximately $1 million, are currently frozen. Half of these immobile funds belong to PercentFinance’s “community mod team,” according to the post. Withdrawals for other markets are open, but the team is urging users not to borrow from any of PercentFinance’s markets in the meantime.

Related: What October’s Metrics Tell Us About BTC, ETH and Volatility

Read more: Supply of Tokenized Bitcoin on Ethereum Now Tops $1.1B: Here’s Why

The error

In a Discord discussion regarding the vulnerability, Vfat, an Ethereum and PercentFinance developer, said the developer who forked PercentFinance from Compound Finance used “old contracts from Compound instead of … newer, much better versions.”

Vfat moved to upgrade some of these smart contracts, specifically those that handle the interest rates for the platform’s loans. After Vfat finalized the changes and deployed them, he realized the signatures for the old contracts and the new contracts were incompatible, so transactions could not be signed to them.

“The old and new interest rate models have different function signatures on these all important functions,” he said in the Discord chat. “Essentially the token contract is trying to find an interest rate function that doesn’t exit, so it always fails in every interaction.”

Related: First Mover: Bitcoin Likes Biden (and Fed’s Powell) as Price Approaches $15K

Vfat also said in the chat the “Compound [team has] confirmed that this means that the contract is bricked.”

The recourse

In direct messages with CoinDesk, Vfat said it is still too early on in the recovery process for a definitive plan, especially considering no one has had a chance to speak with Centre or BitGo yet, the issuers of the USDC crypto dollar and WBTC token, respectively.

Because USDC and WBTC have backdoors intp their smart contracts, these issuers would be able to blacklist the addresses with the locked funds (even though they are already inaccessible, Vfat said this would be a good “extra precaution”). After the blacklisting, BitGo and Centre could then reissue new tokens to the old tokens owners, something Tether did for a trader who mistakenly transferred $1 million in USDT tokens to the wrong address.

Read more: Tether Still Dominates Stablecoins, but USDC and Dai Are Winning DeFi

A Centre representative told CoinDesk the company can only meddle with USDC transactions if it receives “a valid, binding court-order from a competent U.S. court that has authority over Centre.” 

Representatives for BitGo were not available for comment at press time.

For other recovery efforts, Vfat said one early-stage proposal suggests launching new contracts for the USDC lending markets. Though 27% of the loans are locked in the old contracts, these new ones would allow borrowers to pay back the rest of their loans, and so retrieve their collateral and pay lenders back 73 cents on the dollar.

All, 100%, of the PercentFinance lending platform’s WBTC is locked up, so without cooperation from BitGo those funds are lost to the ether. Likewise, 100% of PercentFinance’s ETH funds were also frozen, and there’s no practical way to recover these funds.

“Regardless of this haircut procedure I am taking responsibility for the full amount of these losses and will do everything I can to make everyone 100% whole,” Vfat told CoinDesk.

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The United States Department of Justice (DOJ) filed a lawsuit Thursday to stop Visa’s planned $5.3 billion acquisition of fintech firm Plaid, saying it violates antitrust laws and would eliminate competition in the online debit market. 

Filed in a Northern California federal court, the lawsuit described Visa as a “monopolist” in online debit transactions and noted its proposed acquisition of Plaid violates both Section 2 of the Sherman Act and Section 7 of the Clayton Act.  

According to the DOJ’s complaint, Visa currently operates the largest card network in the United States and has a 70% market share of all online debit transactions. Plaid, on the other hand, provides the technological infrastructure for multiple fintech platforms such as PayPal’s Venmo and crypto exchange Coinbase. 

Related: US Seizes $24M in Crypto as Part of Brazilian Probe Into $200M Fraud Scheme

Plaid has also been working with at least two decentralized finance (DeFi) startups, Dharma and Teller Finance. 

The complaint said that in making its case before Visa’s board of directors to buy Plaid, Visa’s senior leadership estimated a “potential downside risk” of $300 million to $500 million “in our U.S. debit business” by 2024 should Plaid fall into the hands of a rival. According to the Justice Department, Visa knew losing Plaid could create an “[e]xistential risk to our U.S. debit business” and that “Visa may be forced to accept lower margins or not have a competitive offering.”

While the anti-trust lawsuit acknowledged Plaid’s current technology doesn’t directly compete with Visa, DOJ noted Plaid’s online debit service could become a significant competitor to Visa and Mastercard. 

“If allowed to proceed, the acquisition would deprive American merchants and consumers of this innovative alternative,” Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division said in a statement.  

Related: ZenGo Joins Visa Fast Track Program to Get Non-Custodial Crypto Card Off the Ground

Plaid declined to comment but a Visa spokesperson told The Wall Street Journal that the lawsuit is “legally flawed and contradicted by the facts. … The combination of Visa and Plaid will deliver substantial benefits for consumers seeking access to a broader range of financial-related services, and Visa intends to defend the transaction vigorously.”

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