CoinDesk Crypto

Bitcoin (BTC) was lower for a third straight day around $13,500, having fallen back from a fleeting 33-month high of $14,093 over the weekend.

In traditional markets, Asian and European shares rose and U.S. stock futures pointed to a higher open. The yield on 10-year U.S. Treasuries increased 0.03 percentage point to 0.88%. Gold strengthened 0.2% to $1,899 an ounce. 

Market Moves

The U.S. presidential election is finally here. President Donald Trump’s Republicans are as convinced that Democratic challenger Joe Biden will lead America down an irreversible path toward socialism and disorder as Democrats are convinced another four years of Trump could well signal the end of democracy and decency.  

Related: The Crypto Industry Remains Mostly Unengaged in Election 2020

A lot of bitcoiners are just putting their faith in bitcoin. 

None of this may be justified, or perhaps all of it. First Mover decided that the best way to add value as American voters go to the polls was just to jot down a few bitcoin-oriented talking points. 

1) Bitcoin prices barely reacted when Trump defeated Hillary Clinton in 2016:

2) Bitcoin’s price action for the entire month of November 2016 gets completely lost in the longer-term chart:

Related: Bitcoin’s Implied Volatility Rises Ahead of US Election

3) A “blue wave” in which Biden wins and Democrats take control of the upper legislative chamber, the U.S. Senate, could make it easy for the former vice president to implement an agenda that includes spending big on societal issues and climate change. Such fiscal stimulus could expand already record U.S. federal budget deficits and probably would have to be financed by the Federal Reserve via money printing. Bitcoin might benefit from an ostensible weakening in the U.S. dollar.    

4) A “red wave” in which Republicans hold the presidency and U.S. Congress is viewed as a “low probability” event, according to Reuters, but could lead to a rally in stock prices and a “risk-on” environment for financial assets. That was a pretty bullish environment for bitcoin in the decade through 2019. Trump has promised “massive tax cuts” during a second term along with massive stimulus. That would probably mean the Fed needs to print massive amounts of new money to finance it all. 

5) In any scenario, stimulus is the likely winner, as previously reported in this column. “Regardless of the outcome, bitcoin will prosper,” wrote Matt Blom, head of sales and trading at the cryptocurrency-focused financial firm Diginex. 

6) The FTX crypto exchange’s TRUMP 2020 futures contracts, which pay out 100 cents on the dollar if the sitting president wins and $0 otherwise, have surged over the past week but are still indicating that Trump is headed for a loss. The tokens were changing hands at 38 cents late Monday. Note that these also pay out if Trump technically loses but is still president after January 2021:

7) A host of key local elections for could shake up the landscape for crypto-industry policymaking for years to come, as reported by CoinDesk’s Nikhilesh De in his pop-up newsletter, State of Crypto: Election 2020.   

8) Much of the election handicapping in traditional markets has focused on the potential for steep volatility in the event that there is no clear election result, potentially leading to prolonged uncertainty or even a constitutional crisis. “Should election results lead to turmoil and instability in the U.S., it would make sense” for more people to turn to bitcoin or other cryptocurrencies as they grow “ever weary of central banks and politicians in general,” said Denis Vinokorov of the crypto prime broker Bequant. 

9) Because voters have already cast early ballots in unprecedented numbers, the potential for prolonged uncertainty may be overstated, according to Mati Greenspan, founder of the cryptocurrency analysis firm Quantum Economics. It “will be measured in hours, maybe days, and not weeks and months as some expect,” Greenspan told clients in a newsletter. That might mean there’s less to knock bitcoin prices off their medium-term trajectory, which lately has been up.    

10) If Biden wins, the next couple months of the “stub period” prior to the mid-January inauguration might see outsize risks as “Republicans aim to avoid aiding an incoming Democratic administration,” according to the Washington Post. Unemployment is elevated, the coronavirus continues to spread and the economy is going through tectonic shifts such as the transition toward remote working. All that means that there’s little likelihood of calm returning to traditional financial markets or crypto markets anytime soon.  

11) Trump’s $1.5 trillion of tax cuts in late 2017 boosted employment but never really paid for themselves and thus ballooned the national debt, even before the pandemic hit. As the economy slowed in 2019, the Fed had to loosen monetary policy to keep markets from falling. That helped to rekindle a bull market in bitcoin following the harsh bear market of 2018. Bitcoin took another leg up this year as the Fed pumped $3 trillion into global markets. In the end, the cryptocurrency gained 19-fold over the past four years. 

Bitcoin Watch

Both bitcoin and traditional market investors look to be predicting a pick-up in volatility following Tuesday’s U.S. elections.

The largest cryptocurrency’s one-month implied volatility – expectations of how turbulent prices will be over the next four weeks, as implied in options markets – has risen to a two-week high of 59% in the past three days, according to data source Skew.

“We expect the cryptocurrency to trade volatile in the coming days,” Matthew Dibb, co-founder of Stack Funds, told CoinDesk. 

The heightened short-term price volatility expectations could be associated with fears that the outcome of the election may be contested, resulting in a period of political and economic uncertainty.

While the one-month implied volatility has picked up, the six-month metric remains flat above 60%. That suggests the market does not expect a prolonged period of political uncertainty in the world’s largest economy.

Further, the 10-percentage-point rise in the one-month implied volatility isn’t a big move and indicates a moderate shift in sentiment, according to Vishal Shah, an options trader and founder of derivatives exchange Alpha5.

More extreme sentiment is seen in traditional foreign exchange markets, where the Chinese yuan’s one-week implied volatility has doubled in the past week to the highest since 2011.

One-week implied volatility gauges for the euro and the yen have also risen to the highest since April.

– Omkar Godbole

Read More: Bitcoin’s Implied Volatility Rises Ahead of US Election

Token Watch

Ether (ETH): Amount of ether held at major centralized cryptocurrency exchanges drops to two-year low as decentralized exchanges grow in popularity. 

Bitcoin (BTC): Mining difficulty sees largest percentage drop in 9 years: 

What’s Hot

Hong Kong securities watchdog may soon regulate all crypto trading platforms (CoinDesk)  

PayPal plans rapid expansion of cryptocurrency service in 2021 (CoinDesk) 

It’s the “Super Bowl” of prediction markets as U.S. election spurs volume surge on crypto betting platforms (CoinDesk) 

Crypto exchange Huobi denies rumors that senior executive was arrested (CoinDesk) 

DeFi trading app Dharma now connects directly to U.S. bank accounts via automated clearing house (ACH) purchases (CoinDesk) 

Lightning Labs, leading software team focused on bitcoin’s Lightning Network, releases Pool, a peer-to-peer marketplace allowing users to lend out bitcoin in payment channels in return for yield (CoinDesk) 

China’s first-mover advantage on central bank digital currencies might be overblown, since laggards (such as the U.S.) could learn from early mistakes (CoinDesk Opinion) 

Digital-asset trading volumes on decentralized exchanges dropped 25% in October after doubling for three consecutive months (CoinDesk):

Analogs The latest on the economy and traditional finance

Australia’s central bank cuts key interest rate to record low, now in a range from 0.1% to 0.25%, and will buy A$100B ($70B) of bonds over next six months (Reuters) 

Italian bank Monte dei Paschi CEO reportedly tells board that 1.5B-2B euro of bailout cash is needed to avoid breaching capital requirements (Reuters) 

Japanese property investors are feeling the heat as Tokyo urbanites migrate to suburbs (Reuters) 

Best performing traditional asset class in October (Hong Kong’s Hang Seng index) gained about 3%, versus bitcoin’s 29% (Deutsche Bank):

Tweet of the Day Related Stories

• Ripple Joins Business Alliance Advocating ‘Safe and Accessible’ US Election
• Market Wrap: Bitcoin Bounces From $13.2K; Ether on Centralized Exchanges at 2-Year Low

[UPDATED] Ant Group’s IPO has been suspended on both the Shanghai and Hong Kong stock exchanges due to significant changes in China’s regulatory environment for fintech firms that are expected to affect the company. 

The Shanghai exchange said Tuesday that the changes will create new requirements such as more financial disclosures ahead of IPOs, making it more difficult for fintech companies to list. HKEX made a similar announcement soon after.

The announcements come on the heels of an interview between Jack Ma, founder of Ant Group and four major Chinese financial regulators including the central bank and China Securities and Regulatory Commission. 

Related: Hong Kong’s Securities Watchdog May Soon Regulate All Crypto Trading Platforms

Just days before the IPO was to go ahead, the four regulators put forward a slew of new regulations that are targeted at fintech companies like Ant Group. In particular, measures from the China Banking and Insurance Regulatory Commission would further regulate fintech companies’ lending businesses, while requiring more licenses for cross-province transactions and imposing new limitations on the borrowers. 

Also read: Ant Unveils Blockchain Product as Group Approved for World’s Biggest IPO

The twin IPO in Hong Kong and Shanghai has been expected to be the largest ever, raising as much as $37 billion.

Ant Group is known for its major subsidiaries like Alipay and Kakao, but it also has a blockchain arm offering services based on its own AntChain technology.

Related: Huobi Denies Rumors a Senior Executive Was Arrested

UPDATE (Nov. 3, 2020, 14:06 UTC): Following the publication of this article, the Hong Kong stock exchange also suspended Ant Group’s IPO efforts.

Related Stories

• Cayman Islands Announces Legal Framework in Bid to Attract Crypto Businesses
• PBoC Governor Says ‘Successful’ Digital Yuan Trials Have Transacted $299M

The crypto industry appears largely uninvolved in this year’s election, beyond their normal, ongoing efforts to seek friendly regulations and laws in Washington, D.C.

According to Federal Election Commission (FEC) data, employees at 10 significant firms to the cryptocurrency space – including Coinbase, Ripple, Andreessen Horowitz, Uniswap, Compound, BitGo, Gemini, Chaincode Labs, Kraken and Digital Currency Group and subsidiaries (disclosure: CoinDesk is a DCG subsidiary) – donated a cumulative total of around $100,000. 

This is not a comprehensive list of companies, in part due to lack of available data, but it points to a general trend for the 2019-2020 filing period. Other startups in the space also showed low numbers of donations.

Related: First Mover: 11 Election Talking Points on Bitcoin as TRUMP Futures Point to Loss

How to explain this relative lack of engagement? While issues that would seem important to the average bitcoiner – such as the economy and how government stimuli are doled out – are at stake, other critical areas like the COVID-19 pandemic, health care, foreign policy and immigration are also top of mind.

Or perhaps the deeply polarizing battle between U.S. President Donald J. Trump and his Democratic challenger Joe Biden has simply eclipsed relatively niche issues like cryptocurrency.

“I think the Biden-Trump [campaign], just the general politics, has sucked the air out of the room when it comes to specific issues,” said Tyler Whirty, the founder of HODLpac, a crypto-focused political action group.

Despite this lack of engagement, the election will impact how laws and regulations governing the crypto space unfold over the next four years. Organizations like the Blockchain Association, Chamber of Digital Commerce and Coin Center have all been working to educate lawmakers and inform both crypto-specific and adjacent policy, said Brian Nistler and William Brannon, attorneys with the Lowenstein Sandler law firm. 

Donations

Related: Bitcoin’s Implied Volatility Rises Ahead of US Election

On an individual level, the crypto community hasn’t been overly engaged with the election. There seems to have been little to no public discussion of issues pertinent to the industry, such as data privacy or encryption.

The vast majority of funds donated by the employees of the 10 firms mentioned appear to have gone to ActBlue, the nonprofit donor group that supports Democratic Party candidates and other progressive groups, in the 2019-2020 filing period. 

Coinbase employees donated nearly half of these funds, totaling just under $45,000, with a16z coming in second at $24,000. 

Still, these figures pale in comparison to the $1.5 billion ActBlue reported raising in just the third quarter of 2020 from 6.8 million individuals overall. 

Donations from representatives in specific industries are one way for these industries to get lawmakers’ attention, said Ron Hammond, an industry lobbyist and former aide to Congressman Warren Davidson (R-Ohio).

Read more: Election 2020: What’s at Stake for the Crypto Industry

“PACs do a lot to help move the needle,” he said. “That’s why realtors get a lot of legislation passed … It cuts across both sides of the aisle.”

Overall, however, crypto donations in the political space are “noticeably lacking” at the moment in any significant volume, Hammond said. 

That’s not to say the crypto community hasn’t made efforts to get more involved, Nistler and Brannon said. 

“Various groups have advocated a mix of progressive and practical regulation as well as a more hands-off regulatory approach,” they said. “Those that favor such a hands-off approach tend to focus on the resiliency and independence of the blockchain functionality underlying cryptocurrency.”

Still, “many individuals” believe that some amount of regulation around the space is necessary to help the overall industry grow, they said.

‘Opportunity’

The 2020 election is important to the crypto industry, “no matter how you look at it,” said Graham Newhall, a communications advisor to the Blockchain Association. 

Whirty said HODLpac had seen some decent engagement since its launch earlier this year, with a few hundred individuals signing up to the project. Not every signup has donated, however. 

The PAC held its first community vote last week, which allows donors to choose who will receive the funds raised by the PAC. The group’s purpose is to promote crypto interests among the U.S.’s political leaders and, according to Federal Election Commission (FEC) filings, raised a total of $27,000 this year, or about $6,000 since its public launch in March. 

The funds were distributed to 10 U.S. representatives, with the top recipient – Rep. Sean Maloney (D-NY) – receiving 36 votes. 

“A lot of people in the industry are paying attention but they’re not doing so from a crypto perspective; they’re just watching the election just like anybody else,” Whirty said. 

Read more: Crypto Traders Bet on US Election as FTX Prediction Markets Hit Record Volumes

Individuals may begin engaging more actively, especially if there is a return to normal following the election and pandemic, said John Collins, a partner at advisory firm FS Vector. 

“If you’ve got a situation that’s … functional in whatever combination that looks like, and we can start asking people for legislation, I think there’s a lot of opportunity for the crypto space,” he said. 

Existing efforts to engage with regulators are already paying off, Nistler and Brannon said, pointing to PayPal’s recent move into the crypto space after securing a conditional BitLicense from the New York Department of Financial Services. 

“Through industry engagement, New York’s Department of Financial Services recently established a conditional licensing program aimed squarely at streamlining and lowering the barrier to entry for market participants to engage in cryptocurrency activities in New York,” they said. 

This in turn can benefit other legacy financial firms, they added.

Related Stories

• Ripple Joins Business Alliance Advocating ‘Safe and Accessible’ US Election
• Who Is Better for Bitcoin, Trump or Biden?

Jack Dorsey will retain his position as chief executive officer at social media giant Twitter.

• A committee formed earlier this year to review Twitter’s leadership has concluded that the current management structure with Dorsey at the helm is sufficient, Bloomberg reported Tuesday citing a company filing on the matter.
• “The board will continue to evaluate company and management performance according to a range of factors, including the company’s operating plan and established milestones,” the filing said, while expressing confidence in the existing leadership.
• The panel reviewing a potential leadership change included representatives from activist investor Elliott Management Corp., which took a major stake in Twitter in February.
• The firm had initially been eyeing changes to the firm’s management, with the possible removal of Jack Dorsey as CEO, according to a Bloomberg report at the time based on sources.
• Twitter shares gained about 1% in extended trading on Tuesday’s news.
• The decision to retain Dorsey is also an approval of his ability to lead two public companies concurrently. Along with Twitter, he also heads payments company Square, which recently disclosed bitcoin treasury holdings and has a cryptocurrency development unit.
• While the review committee is keeping Dorsey as Twitter’s chief, it also introduced a plan that would make it easier for outside investors such as Elliott to take control by replacing board members, Bloomberg reported.

Also read: Square Puts 1% of Total Assets in Bitcoin in Surprise $50M Investment

Related Stories

• eToro Adds Insolvency Insurance Policy – Crypto Users Not Included
• Cayman Islands Announces Legal Framework in Bid to Attract Crypto Businesses
• Australia’s Central Bank Kicks Off CBDC Research Project With ConsenSys as Partner
• Swiss Arm of Russia’s Gazprombank Launches Institutional Bitcoin Offerings

The Bangladesh arm of HSBC, one of the world’s largest banks, has completed the country’s first cross-border blockchain trade finance transaction.

According to a press release on Tuesday, the digitized letter of credit (LC) transaction brought a notable reduction in the processing time compared with traditional methods – down from the average of five to 10 days to under 24 hours. The move signifies an important step for Bangladeshi companies in the digitalization of trade, the bank said.

The maiden transaction related to the import of 20,000 tonnes of fuel oil from Singapore by United Mymensingh Power Ltd. for a power station. It was carried out over the trade finance network Contour, built with R3’s Corda Enterprise blockchain technology.

Related: IBM-R3 Pact Shows Tech Trumps Tribe in Enterprise Blockchain

Aimed to facilitate trade, a letter of credit is a financial guarantee from a bank overseeing a transaction between two parties. In the event one party is not able to honor their agreement, the bank steps in to cover the costs and complete the transaction.

“I believe this will usher in a new era of routing international trade transactions as businesses and governments recognize transparency, security, and swiftness in performing tasks using blockchain technology,” said Md Mahbub ur Rahman, CEO of HSBC Bangladesh.

Contour’s first successful LC transaction was conducted between two major petrochemical companies, also in the Asia region, last August 2019, when the platform was known as Voltron. Earlier this year, Standard Chartered claimed the first yuan-based blockchain LC transaction between mining giant Rio Tinto and Chinese steelmaker Baosteel.

HSBC ranks sixth amongst the world’s largest banks and has more than $2.7 trillion total assets under management, according to an S&P Global Market Intelligence 2020 report.

Related: R3 Corda Network Set to Go DeFi With XDC Digital Currency

See also: UAE Bank Opens Bangladesh Remittance Corridor Using Ripple’s Blockchain Tech

Related Stories

• Libra Hires HSBC Veteran Ian Jenkins as CFO, Risk Chief of Digital Payments Unit
• HSBC and Singapore Exchange Execute Successful $300M Digital Bond Issuance

Both bitcoin and traditional market investors look to be predicting a pick-up in volatility following the U.S. elections.

• The cryptocurrency’s one-month implied volatility – investors’ expectation of how turbulent prices will be over the next four weeks – has risen to a two-week high of 59% in the past three days, according to data source Skew.
• “Bitcoin‘s price will be sensitive to the outcome of U.S. elections [on Tuesday],” Matthew Dibb, co-founder of Stack Funds, told CoinDesk. “We expect the cryptocurrency to trade volatile in the coming days and that is being reflected in near-dated implied volatility in the options market.”
• The heightened short-term price volatility expectations could be associated with fears that the outcome of the election may be contested, resulting in a period of political and economic uncertainty.

• While the one-month implied volatility has picked up, the six-month metric remains flat above 60%.
• That suggests the market does not expect a prolonged period of political uncertainty in the world’s largest economy.
• Further, the 10 point rise in the one-month implied volatility isn’t a big move and indicates a moderate shift in sentiment, according to Vishal Shah, an options trader and founder of derivatives exchange Alpha5.
• More extreme sentiment is seen in the fiat currency markets, where the Chinese yuan’s one-week implied volatility has doubled in the past week to the highest since 2011.
• One-week implied volatility gauges for the euro and the yen have also risen to the highest since April.
• Implied volatility is gauged by demand for options as hedging instruments.
• Seasoned traders often buy both calls and put options, or hedge buy positions in the spot or futures market by buying put options when expecting uncertainty. That pushes the implied volatility metric higher.
• A call option gives the holder the right to buy the underlying asset at a predetermined price on or before a specific date, and the put option gives the right to sell.

View

• The traditional markets will likely suffer, aggravating an ongoing technical pullback in bitcoin, if the U.S. elections are contested.
• While Democratic candidate Joe Biden is leading in most polls, online betting markets are more bullish on the odds for President Donald Trump.
• Once the dust settles post-election, the rising pile of negative-yielding bonds across the globe is likely to reignite the bitcoin bull run as investors seek returns.
• Bitcoin is currently trading largely unchanged on the day near $13,550, having fallen back from a fleeting 33-month high of $14,093 over the weekend.

Also read: Bitcoiners Have Trillions and Trillions of Reasons to Ignore US Election

Related Stories

• The Crypto Industry Remains Mostly Unengaged in Election 2020
• Ripple Joins Business Alliance Advocating ‘Safe and Accessible’ US Election
• Market Wrap: Bitcoin Bounces From $13.2K; Ether on Centralized Exchanges at 2-Year Low
• Who Is Better for Bitcoin, Trump or Biden?

Blockchain payments startup Ripple has joined an alliance comprising of almost 1,000 major U.S. companies and CEOs calling for calm and fairness in Tuesday’s presidential election.

The Civic Alliance now has 993 member firms with an employee count totaling more than 5 million, according to the its website.

“We believe voting should be safe and accessible to everyone, everywhere. That’s why Ripple is 100% in #ForDemocracy with @CivicAlliance,” Ripple said in a tweet Tuesday.

Related: Bitcoin’s Implied Volatility Rises Ahead of US Election

The group is advocating for all U.S. citizens to have “a voice” in the country’s democratic processes. “Voting should be safe and accessible to all. Elections should be fair and transparent,” a statement on the website reads.

Some of the country’s largest companies are pledging to the cause, including Microsoft, Twitter, Deloitte, Facebook and PayPal among others. The group has committed to offer paid leave for their employees, allowing them time to go out and vote, as well as assist at polling stations on Nov. 3.

“As business leaders, we’re committed to strengthening our democracy by encouraging nonpartisan voter participation,” the alliance’s website reads.

While not referenced directly by the alliance, incumbent U.S. President Donald Trump has sought for months to undermine some elections processes such as mail-in voting, seen by his campaign as favoring the Democrats. On Monday, he heavily criticized a decision by the Supreme Court to allow Pennsylvania’s extended count of mail-in ballots postmarked by election day.

Related: Who Is Better for Bitcoin, Trump or Biden?

Some Trump supporters have also been taking to the streets in truck convoys and have reportedly disrupted voting in some areas.

Republicans have also raised concerns of left-wing violence if Joe Biden does not win. The National Guard is said to be on standby in case of unrest around the election.

“Growing civil unrest, and polarizing politics are challenging our democracy in new ways,” states the Civic Alliance.

The group’s CEOs statement calls for “safe access to the polls for all voters,” for election officials to be recognized as the “trusted source for certified results” and “patience” as all votes are counted.

Ripple joining the group is perhaps something of a surprise, after its CEO Brian Armstrong eschewed corporate activism in favor of a “mission focused” stance in a blog post in September.

See also: Who Is Better for Bitcoin, Trump or Biden?

Related Stories

• First Mover: Bitcoin Retreats Before US Election After Dominating Crypto in October
• Overstock Touts Voatz Blockchain Voting App as Solution to US Election Fracas

Bitcoin’s mining difficulty just recorded its largest percentage decrease since the advent of ASIC mining machines in late 2012, dropping by just over 16% and giving miners a reason to celebrate as their profitability is set to increase significantly.

Difficulty dropped to 16.787 trillion at around 09:00 UTC on Tuesday, its lowest level since June, according to data aggregated by BTC.com. The adjustment marks the second largest percentage decrease of all time. 

Mining difficulty is a relative measure of the amount of resources required to compete for mining new bitcoins. It climbs or falls at the end of roughly two-week epochs (or 2016 block periods) depending on whether the total estimated hash power consumed by the network has also increased or decreased.

Related: Bitcoin Mining Firm Hut 8 Appoints Jaime Leverton as CEO

Tuesday’s significant adjustment comes as many mining companies in China’s Sichuan province are taking machines offline and relocating to cheaper energy sources after the end of the region’s rainy season, as CoinDesk previously reported. 

Over the next two weeks until the next adjustment, miners with machines still online will enjoy a welcome respite after battling an unusually difficult year, which Thomas Heller, COO at mining software company HASHR8, described as “truly one of a kind.” 

As bitcoin’s price has increased significantly over the past few months and the amount of power needed to now mine new bitcoins has decreased, “margins for efficient miners will significantly widen,” explained John Lee Quigley, director of research at HASHR8, in a note published Monday. Further, “a myriad of inefficient miners will be able to mine profitably again,” he added. 

In short, between now and the next difficulty adjustment will be “extremely lucrative” for bitcoin miners, Quigley told CoinDesk in a direct message.

Related: Bitcoin Miners Saw 8% Revenue Increase in October

Beyond its size, Tuesday’s adjustment is also notable because of the infrequency of negative adjustments. Only 17% of adjustments are negative, and even fewer – roughly 2% – are double-digit percentage decreases. 

“What we are seeing now is indeed an anomaly,” said Quigley. “Higher prices almost always lead to higher difficulty.”

Machines being relocated by Asia-based mining companies are expected to come back online over the next few weeks, moreover, and other miners may bring more machines online in the coming weeks to take advantage of the increased period of profitability, which could cause a difficulty increase over the coming adjustment periods.

Improved margins for miners during the hashrate drop are temporary, said Daniel Frumkin, engineer and technical writer at Slush Pool, the first ever bitcoin mining pool launched by Braiins in 2010. 

“That said, nobody will complain about bigger margins for 2 to 4 weeks,” he told CoinDesk. 

Also read: Bitcoin Miners Saw 8% Revenue Increase in October

Related Stories

• Bitcoin Transaction Fees Rise to 28-Month High as Hashrate Drops Amid Price Rally
• ‘A Race Toward Zero’: With Hashrate in the Clouds, Bitcoin Mining Is Less Profitable Than Ever

Hong Kong’s government is seeking to change the rules for cryptocurrency trading firms operating or offering services within the city jurisdiction.

A new consultation paper detailed by Clara Chiu, director of licensing at the Securities and Futures Commission (SFC), in a keynote speech at Hong Kong FinTech Week 2020 on Tuesday, will propose that the SFC be given expanded regulatory oversight over all “centralized virtual asset trading platforms” in Hong Kong.

This will be regardless of whether they provide access to tokens considered to be securities or solely cryptocurrencies like bitcoin.

Related: Cayman Islands Announces Legal Framework in Bid to Attract Crypto Businesses

The SFC implemented regulatory guidance in 2019 that sought to treat digital asset firms trading at least one security token under the same rules as securities brokerages, but signing up with the regulator was voluntary.

“Under the current legislative framework if a platform operator is really determined to operate completely off the regulatory radar it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security,” said Ashley Alder, CEO of the SFC in a speech also on Tuesday, Reuters reports.

That is now set to change in line with guidance from the Financial Action Task Force (FATF), Chiu said, with all cryptocurrency trading platforms proposed to apply for an SFC license under the city’s anti-money laundering legislation.

As a FATF member, Hong Kong is “under an obligation” to align with the AML standards for virtual asset service providers, she added.

Related: Library of Congress Reports Surge in Crypto Law Searches

If serious breaches are committed on the platforms, such as market manipulation, “there will be intervention and restriction on their business,” according to Chiu.

Crypto platforms will initially only be allowed serve professional investors under the proposed regime, and will have to maintain high levels of investor protection and security, she said.

The proposal will not change the existing scenario for platforms now operating under the security token regime.

See also: Hong Kong ‘Exploring’ Collaboration With China on Digital Yuan: Finance Chief

Related Stories

• Ripple Eyeing Move to London Over XRP-Friendly Stance, CEO Says
• Ant Unveils Blockchain Product as Group Approved for World’s Biggest IPO

In just over three weeks, the trading volume on decentralized betting platform Polymarket went from zero to almost $3 million. 

As of Monday, Polymarket’s “Will Trump win the 2020 U.S. presidential election?” had over $2.8 million worth of bets placed, with each bet (for possible answers “yes” or “no”) costing less than a dollar. The platform allows users to place crypto bets on highly-debated current events and public topics including politics, pop culture, business and health, according to its website. 

Polymarket is a non-custodial platform, meaning it does not hold or store user-funds, and bets can be placed in the dollar-backed stablecoin USDC. 

Related: DeFi Trading App Dharma Now Connects Directly to US Bank Accounts

Prediction markets, where users can bet on the outcome of future events, are a key application of Decentralized Finance (DeFi), which allows users to conduct financial transactions with low fees and without a middleman. Elections and political debates attract high numbers of traders to these platforms; decentralized prediction platform Augur launched five years ago, but struggled to take off until U.S. midterm election betting gave it a push in 2018. 

“To me, the presidential election is the Super Bowl for prediction markets. Every single one is experiencing a massive uptick in volume. It’s only natural that crypto follows suit,” David Liebowitz, vice president of business development at decentralized encyclopedia Everipedia, told CoinDesk via Telegram.  

Elections also seem to attract new users to crypto betting platforms.  

“There are people who are using it, who aren’t even crypto native users. They don’t even fully understand crypto but they’re still using Polymarket,” said Shayne Copland, founder of Polymarket.

Related: Binance Labs–Backed ‘DeFi Credit Union’ Bringing Higher Yields to Savers in Nigeria

Just over a week ago, Polymarket announced it had secured $4 million in its latest round of funding, attracting high profile investors from the industry. Augur launched its new and improved Version 2 in July this year.  

Read more: All-In on DeFi: Why the Days of Centralized Exchanges Are Numbered

After Elections

Users are looking at a number of betting and prediction markets in the runup to Tuesday’s election. Anonymous crypto betting platform YieldWars launched its election battle last night and has since attracted over $50,000 in bets. Users can stake either the platform’s native $WAR token or $ETH. 

YieldWars’ co-founder, who goes by Owl, told CoinDesk via Telegram that the sudden rise in volume is far from shocking given the scale and importance of the election. 

“Crypto-based prediction markets should be flourishing on blockchain right now but have failed to deliver up to this point. The election has breathed life into prediction markets but what is going to happen when it ends? Are people going to be as enthusiastic about them?” Owl said. 

Owl also said YieldWars may have found the “secret sauce” to keep people interested in betting, by creating Battle Royale-style tournaments for betting, ideal for sporting events. The election face-off is a one-time battle, where two pools are running simultaneously, one in each currency. 

The platform has partnered with Everipedia to use Associated Press (AP) election data for resolving its election betting market.

Read More: Prediction Markets’ Time Has Come, but They Aren’t Ready for It

In October 2020, the reputed wire-service AP, in a first, partnered with Everipedia to create Oracle, an immutable record of 2020 election results on a blockchain.  

“I don’t think there could be a more trusted source than the AP and seeing that the Oracle was built using Chainlink infrastructure, it was only logical to go with this option,” Owl said.  

According to Liebowitz, blockchain has long been viewed as the best platform for prediction markets to thrive. But centralized betting platforms like PredictIt are still leading the game. PredictIt has 214 “markets” or betting scenarios compared to the new-kid-on-the-block Polymarket’s 19 markets. As of Monday, PredictIt’s top event “2020 Presidential Election Winner?” had 116.7 million shares traded. 

Copland declined to say how that compared to Polymarket, calling it a “bizarre metric” adding his platform only tracked dollar-trading volumes, and it did not have an equivalent.

Then, there is the expectation that elections will boost betting volumes. 

“It’s only going to get bigger from here, especially four years from now when the next election comes around,” Liebowitz said. 

According to Copland, the demand for blockchain-based betting markets has always been there. 

“It was just clear that there was a lot of demand for this. I would say, the past week or two, the demand has actually materialised. Still, these are just the very early days,” Copland said. 

Related Stories

• Opium Raises $3.3M to Make Exotic Crypto Derivatives Available to All
• Uniswap Proposal to Airdrop More UNI Falls Short in Governance Vote

PayPal’s cryptocurrency service is going to expand rapidly in 2021, executives said on the payments giant’s third-quarter earnings call Monday evening.

That includes crypto services coming to Venmo and international customers in the first half of 2021, PayPal CEO Dan Schulman said. 

Currently, only 10% of customers in the U.S. have access to the new crypto service with the rest of the U.S. gaining access to the tools in the next two to three weeks, Schulman said. PayPal saw enough interest following its Oct. 21 announcement that the firm has increased weekly crypto purchase limits from $10,000 to $15,000.

Related: Mastercard President Says Crypto Patents Will Pay Off When Central Bank Digital Currencies Arrive

Schulman went on to predict there would be greater opportunities for PayPal in an economy that embraces digital identity and fully digital payments and financial services. 

When talking about central banks creating retail-facing digital currencies, Schulman added that PayPal is looking to create “the most expansive and compelling digital wallet in the world.”

In October, PayPal confirmed what CoinDesk had reported in June: It was adding features for users to be able to buy, hold and sell cryptocurrencies.

Bitcoin saw a 15% increase in price in response to the news but PayPal’s stock price has trended downward by 12% since the Oct. 21 announcement.

Related: Paxful to Roll Out Crypto Debit Card for US Customers

The payments giant reported an increase of 36% in new payments volume to $247 billion in Q3 2020. The company’s number of merchants grew by 1.5 million to 28 million. PayPal now has 361 million active accounts, a 22% increase quarter-over-quarter.

PayPal’s most recent earnings report had only the slightest mention of cryptocurrency, briefly recapping its crypto announcement in the “business updates” section.

This is a developing story.

Related Stories

• Crypto Exchange Huobi Adds Direct Visa, Mastercard Payments
• PayPal’s Crypto Offering May Be ‘a Huge Headache’ for Taxpayers

Bitcoin opened the week recovering from a dip while ether balances on centralized exchanges fell.

• Bitcoin (BTC) trading around $13,673 as of 21:00 UTC (4 p.m. ET). Slipping 1.2% over the previous 24 hours.
• Bitcoin’s 24-hour range: $13,221-$13,877
• BTC above its 10-day but below the 50-day moving average, a sideways signal for market technicians.

Bitcoin’s price dipped as low as $13,221 at around 12:00 UTC (7 a.m ET), according to CoinDesk 20 data. It subsequently rebounded up to $13,673 as of press time.

Read More: Bitcoin Revisits $13.5K After Posting Best Month Since April

Related: Decentralized Exchange Volume Dropped 25% in October

“It’s interesting to see that today, as the S&P and gold price rose, BTC dropped in today’s market open,” said Andrew Tu of Efficient Frontier, a crypto quant trading firm. “In recent weeks, we have been seeing BTC price diverge from the equities market.” 

Bitcoin’s 90-day correlation, where zero means no mutual relationship, has been dropping since Oct. 18. 

“If this becomes a long-term trend, this could be a very positive sign for BTC should the equities market continue to correct over the medium to long run,” Tu added. Equities are faring quite well Tuesday, with major indexes were in positive territory.

• The Nikkei 225 in Asia ended the day in the green 1.3%, as gains in logistics and industrial stocks helped to lead the index higher.
• Europe’s FTSE 100 closed up 1.3% as upbeat manufacturing numbers for October outweighed lockdowns ordered by the British government.
• In the United States the S&P 500 finished the trading day up 1.2%, helped by a surge in buying as positive manufacturing numbers boosted sentiment.

However, the optimism in equities may not last. “Markets are likely to be unpredictable during the U.S. elections and any unexpected shocks to the system could cause the type of mass sell-off in traditional assets that has in the past brought digital assets down as well, though those dips tend to usually be only temporary,” cautioned Guy Hirsch, U.S. managing director of multi-asset brokerage firm eToro. 

Related: First Mover: Bitcoin Retreats Before US Election After Dominating Crypto in October

Bitcoin volumes for Monday on major spot exchanges totaled $490 million as of press time, much higher than the past month’s average of $257 million and closing in on this past Monday’s $502 million total. 

However, higher volume than this past month’s average is not translating into major price action Monday with an uncertain U.S. presidential election looming Tuesday, Nov. 3.

“This is the calm before the storm,” said David Lifchitz, chief investment officer of ExoAlpha. “Most investors remain prudent and don’t want to take a bet on an event whose outcome is binary: Will there be panic selling or a relief rally on Nov. 4?” 

Options traders see a 51% chance bitcoin is over $13,000, a 42% probability of the price of BTC over $14,000 and a 27% chance of surpassing $15,000 for November expiration. 

Crypto could see some big movements once there is some clarity on the election and pent-up capital is unlocked, added Zachary Friedman, chief operation officer of trading firm Global Digital Assets. “Right now, pre-election, capital is staying sidelined in a wait-and-see fashion.”

Ether on exchanges drops

Ether (ETH), the second-largest cryptocurrency by market capitalization, was down Monday, trading around $387 and slipping 1.8% in 24 hours as of 21:00 UTC (4:00 p.m. ET). 

Read More: DeFi Trading App Dharma Now Connects Directly to US Bank Accounts

The amount of ether in reserve, or held by major centralized exchange addresses, a metric calculated by data aggregator CryptoQuant, has dropped to 11,628,046 ETH, a low not seen since Aug. 14, 2018. 

One factor for the decline, according to Denis Vinokourov, head of research at digital asset prime broker Bequant, is the rise of decentralized exchanges, or DEXs, and the proliferation of liquid cryptocurrency pairs on those venues. 

“The number of currencies available to trade on DEXs rose to 8,000 in October versus 1,500 in early January,” Vinokourov noted. “The top venue that is Uniswap now commands liquidity of close to $3 billion, which is actually an increase from the levels observed in September.”

Other markets

Digital assets on the CoinDesk 20 are mostly red Monday. One notable winner as of 21:00 UTC (4:00 p.m. ET):

• 0x (ZRX) + 0.32%

Notable losers:

• dash (DASH) – 5.8%
• orchid (OXT) – 5.1%
• ethereum classic (ETC) – 4.8%

Read More: Opium Raises $3.3M to Make Exotic Crypto Derivatives Available to All

Commodities:

• Oil was up 3.8%. Price per barrel of West Texas Intermediate crude: $37.09.
• Gold was in the green 0.95% and at $1,895 as of press time.

Treasurys:

• U.S. Treasury bond yields were mixed Monday. Yields, which move in the opposite direction as price, were up most on the two-year bond, jumping to 0.160 and in the green 5.1%.

Related Stories

• Bitcoin Revisits $13.5K After Posting Best Month Since April
• By the Numbers: More Bitcoin Bulls Than Ever Before

The U.S. Securities and Exchange Commission (SEC) has increased limits dictating how much capital companies can raise before registering in a move that could be a boon for security token offerings (STOs).

• Companies can now raise $5 million in total under Regulation Crowdfunding provisions (previously: $1.07 million), $75 million under Regulation A+ (previously: $50 million) and $10 million under Rule 504 of Regulation D (previously: $5 million), the SEC said.
• As CoinDesk reported in March, the heightened caps could make it easier for startups to conduct security token offerings without running afoul of the regulator.
• SEC also relaxed certain restrictions governing document filing, solicitation practices and accredited investor investment limits in the Monday announcement.
• Chairman Jay Clayton said the changes will ease the burden of capital formation for small and medium-sized businesses.

Read more: SEC Proposal Could (Eventually) Unleash Security Token Sales

In addition to making it easier to raise funds, startups will be able to raise more money and provide themselves a bit more runway as they try to launch operations than under the old caps.

Related Stories

• First SEC Official to Say Ether Is Not a Security Is Leaving the Agency Later This Year
• Election 2020: What’s at Stake for the Crypto Industry
• Vortex Blockchain’s Registration Revoked for Failure to File Reports With SEC
• Kik’s Token Survives SEC Battle, No Barrier to Exchange Listings, Says Kin Foundation

Mastercard President Michael Miebach said the payments processor’s massive trove of cryptocurrency patents will give it an edge once central bank digital currencies (CBDC) debut.

• Mastercard’s cryptocurrency intellectual property “puts us in a good position” for a CBDC future, Miebach told analysts during the firm’s Oct. 28 Q3 earnings call.
• “The link into an acceptance network is critical” for a CBDC, he said. “So we hold some patents in [the crypto] space that link these transactions right back into our network where it can be used. And this is how we can bring value, and it brings value to us.”
• Miebach further asserted Mastercard is “the leading payments player” for crypto IP. That may be true for now, but perhaps not for long. Ant Group affiliate Alibaba is on track to hold an unprecedented number of blockchain patents by the end of the year.
• A company spokesperson did not immediately answer questions regarding the size of Mastercard’s crypto IP trove.
• Miebach said Mastercard is talking with world governments on their plans for a CBDC.
• Miebach is slated to become Mastercard’s chief executive in early 2021.

Read more: Mastercard Releases Platform Enabling Central Banks to Test Digital Currencies

Related Stories

• In the CBDC Race, It’s Better to Be Last
• Paxful to Roll Out Crypto Debit Card for US Customers
• China Should Take Part in Creating Global Regulatory Framework for Digital Currency, Xi Says
• Crypto Exchange Huobi Adds Direct Visa, Mastercard Payments

Monthly volume on decentralized exchanges fell for the first time since April, dropping 25% after three consecutive months of doubling aggregate volume through Q3, according to Dune Analytics.

Aggregate trading volume on decentralized exchanges fell to $19.4 billion in October, down from $25.8 billion in September amid a respite for speculative interest in decentralized finance (DeFi) applications and assets. Even highly anticipated new entrants like SushiSwap and Serum reported over 60% declines in volume last month. 

The sector’s continued cooling is demonstrated by DeFi index futures trading on FTX, which have dropped 29% so far in Q4, currently trading at $1,556. 

Related: Uniswap Proposal to Airdrop More UNI Falls Short in Governance Vote

October’s drop in aggregate volume would have been larger if not for an anomalous record-setting day of trading on Oct. 26. Uniswap and Curve each reported over $2 billion in trading volume that day, an all-time daily record for both trading platforms and extraordinarily higher than the few hundred million dollars in volume per day through most of October.

The widespread drop in volume was simply an expected decline after “peak euphoria from DeFi and yield farming craze” of the past few months, according to Jack Purdy, decentralized finance analyst at Messari, who remains optimistic about the long-term potential for DeFi protocols and assets despite October’s performance.

Notably, last month’s volume decrease didn’t extend to 0x, which reported a 50% increase in trading volume. Purdy told CoinDesk, “0x didn’t see the same parabolic growth as some of the other decentralized exchanges, so it never had the chance to correct to a more normal level.”

To Purdy, the trading platform’s outlier growth demonstrates that “0x traders are more committed long term to decentralized exchange trading as opposed to buying the newest governance token that was first listed on an automated market maker.”

Related Stories

• FTX Raises ‘TRUMP’ Futures Margins as Price Suggests Lower Expectations of Election Win
• Uniswap’s $40M Governance Vote Closes on Halloween and Some UNI Holders Fear for Price
• Market Wrap: Bitcoin Hits $13.6K; 500K ETH Options Pile Up for December

Huobi said Monday the rumors alleging one of its senior executives had been arrested were false.

“We have become aware of rumors within our community about the arrest of a Huobi senior executive by local officials,” the company told CoinDesk. “We can share with confidence that these rumors are false. All of Huobi’s management team members have been accounted for and have not been detained or arrested.”

“We understand that the spread of false information can lead to concerns about the safety of user assets, but please rest assured your assets are safe,” the company said. 

Related: PBoC Governor Says ‘Successful’ Digital Yuan Trials Have Transacted $299M

Unsubstantiated rumors on social media and other media outlets said the exchange’s chief operating officer, Robin Zhu, was arrested on Monday. The exchange claimed Zhu was on a business trip and will be present at a company meeting on Tuesday morning Beijing time.

Huobi had said its operations were unaffected by unspecified “rumors,” according to an earlier statement on its Chinese website. 

However, a few prominent Chinese crypto firms have already kept news that senior executives were “cooperating” with police to themselves for weeks before publicly disclosing these investigations.

Read more: OKEx, Still Paralyzed by Founder’s Arrest, Details Plans for Bitcoin Cash Hard Fork

Related: China Should Take Part in Creating Global Regulatory Framework for Digital Currency, Xi Says

In June, rumors about Dong Zhao, co-founder of Chinese crypto lending platform Renrenbit, “cooperating” with the police for related investigations spread in the Chinese crypto community for over two weeks before the company confirmed the news. 

Another Chinese exchange, OKEx, announced in October founder Star Xu has been under investigation for weeks and the exchange would suspend withdrawals of crypto assets from the platform. The statement came out at least one week after Xu was detained by the police, and users still cannot withdraw their funds

Related Stories

• OKEx, Still Paralyzed by Founder’s Arrest, Details Plans for Bitcoin Cash Hard Fork
• Huobi Beefs Up Venture Arm With Former DragonFly Partner Leading DeFi Investments

The Tron blockchain halted creation and execution of blocks due to a “malicious contract” against a super representative on Nov. 2, according to multiple reports.

First reported by Crypto Briefing, the smart contract blockchain halted block production at 10:00 UTC for some two hours, according to Reddit users. The event is notable as it validates centralization concerns raised against Tron, which already holds an infamous reputation in blockchain circles.

Tron uses a Delegated Proof-of-Stake (DPoS) consensus mechanism. DPoS blockchains sacrifice decentralization for throughput by centralizing certain transaction activities to majority nodes.

Related: Market Wrap: Bitcoin Tests $13.6K as DeFi Total Value Locked Dips Below $11B

Read more: Justin Sun’s BitTorrent to Acquire Esports Platform for New Streaming Ecosystem

Tron CEO Justin Sun followed reports with a tweet thread stating that the pause in block production was caused by an attacker exploiting the latest Tron software. Updating the node’s software began block production again, Sun said.

The platform’s native token, TRX, is down 3% in 24 hours, according to the CoinDesk 20.

Tron did not return questions for comment by press time.

Related Stories

• Justin Sun’s BitTorrent to Acquire Esports Platform for New Streaming Ecosystem
• Market Wrap: Bitcoin Tests $12K; Ethereum Fees Fall to 3-Month Low
• Market Wrap: Bitcoin Regains $10.6K; High-Balance Ether Addresses Decline

October saw the first time the total value locked in all DeFi protocols closed below the month’s starting value. Square Crypto is sponsoring a bitcoin wallet designer. A new civil suit alleges BitMEX executives were looting profits.

At stake

DeFi contraction
In the last week of October, DeFi protocol tokens were bleeding red. 

MakerDAO, one the largest and most successful decentralized lenders, started the week at $2.1 billion locked in. By Friday, that had dipped to $1.96 billion, according to DeFi Pulse. Compound, Aave and Curve similarly shed a few million from their valuations. 

Related: First Mover: Bitcoin Retreats Before US Election After Dominating Crypto in October

In aggregate, DeFi lost $1.5 billion in the last five days of the month, according to DeFi Pulse. With those losses, October marked the first time since the sector’s bull market began that the amount of cryptocurrency “locked in” DeFi contracted compared in the span of a month. 

It wasn’t a steep decline. DeFi’s cumulative valuation stood at $11.28 billion on Oct. 1, and only retreated to $11 billion locked up on Oct. 31. Industry publication Decrypt called the ecosystem’s monthly top at $12.4 billion.

It was this minor decline that may have triggered a more than $2.5 billion sell-off seen this weekend, where the ecosystem retreated to lows of $8.5 billion last seen in early September. 

With prices reverting back to over $11 billion (at press time), it doesn’t appear that DeFi is dead.

Top shelf

Related: Crypto Long & Short: Wyoming Is Crypto’s ‘Wild West,’ Which Is Exactly What We Need

Digital transfers
Over 4 million transactions totaling more than 2 billion yuan ($299 million) have been conducted using China’s digital yuan, Yi Gang, governor of the People’s Bank of China, said. Speaking at the Hong Kong Fintech Week conference on Monday, Yi said the COVID-19 crisis has also accelerated the need for contactless banking, creating challenges for central banks looking to balance consumer needs and safety. That said, the central banker also played down the prospect of an imminent launch, saying the digital yuan project is still in the early stages.

Squaring the crypto
Square Crypto, the cryptocurrency arm of the payments company, has awarded a grant to a designer building easy-to-use bitcoin wallets. Announced via tweet Friday, Maggie Valentine’s development work will answer the question: “How can we provide an intuitive experience for non-crypto users while preserving the security of a user’s funds?” The award comes less than a month after Square said it had purchased 4,709 bitcoins for $50 million, representing 1% of the firm’s assets.

Cayman consensus
The Cayman Islands, an autonomous British Overseas Territory in the Caribbean, is building a regulatory framework for “virtual asset service providers” (VASPs). Announced Saturday, the Caymans’ Ministry of Financial Services has entered “Phase One” of the framework, a set of rules spelling out the nation’s anti-money laundering (AML) and terrorist financing regulations. VASPs already working in the Caymans, or planning to, will need to notify and register with the Cayman Islands Monetary Authority (CIMA) and comply with the AML/CFT rules. “Phase Two,” slated to come into force next June, will look at licensing requirements and “prudential supervision” for VASPs.

Voted down
A proposal to distribute UNI tokens to those left out of a previous airdrop was not adopted in Uniswap’s second governance vote. While many votes were in favor, a quorum was not established, reports CoinDesk’s Zack Steward. Proposed by decentralized finance (DeFi) portal Dharma, “Prop 2” would have sent 400 UNI tokens each to 12,619 addresses that interacted with Uniswap through third-party apps, following a surprise airdrop on Sept. 17, that sent free tokens to anyone who had directly used the platform. A threshold of 40 million voted UNI tokens fell short by less than 2.5 million.

Corporate raiders?
The top officers of HDR, the parent company of crypto trading platform BitMEX, which has been charged with facilitating unregistered trading and other violations, systematically looted $440,308,400 from HDR accounts, a civil lawsuit claims. The suit, filed on behalf of plaintiffs BMA LLC, Yaroslav Kolchin and Vitaly Dubinin, alleges executives began diverting BitMEX’s profits after becoming aware of possible charges in 2019. The U.S. Commodities Futures Trading Commission (CFTC) and the Department of Justice both announced charges against BitMEX on Oct. 1. A spokesperson for HDR called the new civil claims “spurious.”

Quick bites

Blockchain could make dismantling nuclear warheads more secure, King’s College London claims in a recent report. (CoinDesk)

Nigerians protesting police corruption and concerns about a possible internet shutdown are adopting decentralized VPNs, along with bitcoin. (CoinDesk)

Following Coinbase’s announcement, peer-to-peer digital asset marketplace Paxful will launch a Visa debit card. (CoinDesk) 

Mongolia’s oldest bank will offer services including cryptocurrency remittance, custody, deposits, asset management and loans (Modern Consensus)

eToro has unveiled a free insurance scheme covering customers for up to £1 million if the firm should ever become insolvent. But crypto holders are left out in the cold. (CoinDesk)

European Central Bank President Christine Lagarde said the agency is seeking public comments about a digital euro, implying a broad retail offering is now on the table. (Survey)

Market intel

Pop and drop
After October’s 28% bitcoin rally, the market appears to be cooling off. On Saturday, BTC notched a 33-month high of $14,093, but was unable to stay above that level. Trading in the mid $13Ks, this minor pullback has validated the short-term bull fatigue. “Unless the market can establish above $14,000, there is a risk that rally stalls here in favor of a healthy retreat,” Joel Kruger, a currency strategist at LMAX Digital, told CoinDesk. At the low end, bitcoin could revisit the former hurdle-turned-support of $12,500.

Who won #CryptoTwitter? Related Stories

• Money Reimagined: Who Are the Real Monsters?
• Blockchain Bites: Ripple’s MoneyGram Pump, OKEx’s Bitcoin Cash Plan, Bitcoin’s Birthday

Publicly traded mining company Hut 8 announced Jaime Leverton as its new CEO Monday, set to replace interim CEO Jimmy Vaiopoulos on Dec. 1.

• Former CEO Andrew Kiguel stepped down in late April and then-CFO Vaiopoulos was elevated on a temporary basis while the company’s board of directors searched for a permanent replacement. With Leverton’s appointment, Vaiopoulos will return to his prior role for the Toronto-based company.
• Leverton is joining Hut 8 from her current position at eStruxture Data Centers, where she’s chief commercial officer. From Leverton’s LinkedIn profile, it appears her role at Hut 8 will be her first position in the cryptocurrency industry.

Related Stories

• Bitcoin Miners Saw 8% Revenue Increase in October
• Bitcoin Transaction Fees Rise to 28-Month High as Hashrate Drops Amid Price Rally
• ‘A Race Toward Zero’: With Hashrate in the Clouds, Bitcoin Mining Is Less Profitable Than Ever
• Marathon Purchases Additional 10,000 S-19 Pro Miners From Bitmain

The team behind the Bitcoin Lightning Network’s leading software implementation is launching a marketplace for Lightning users to lease liquidity for payments on the second-layer network.

Today, Lightning Labs announced the release of Pool, “a non-custodial, peer-to-peer marketplace for Lightning node operators to buy and sell access to liquidity,” according to a press release. The service will allow Lightning Network users to lend out bitcoin in payment channels in return for yield. Businesses and services providers can then draw on this liquidity when needed to manage Lightning Network payment flows.

“Efficient capital allocation is one of the most widely felt pain points when using the Lightning Network. Existing node operators do not have access to pricing signals to help determine where in the network their outbound liquidity should be allocated, and new node operators have no way to signal that they need new inbound liquidity,” the press release states.

Related: Putting Pressure on Bitcoin’s Lightning Network Vulnerabilities Will Strengthen It

“Lightning Pool brings these two sides together into a single market while allowing them to maintain custody of their funds.”

Pool provides a marketplace for Lightning Network liquidity

Bitcoin’s Lightning Network offers cheaper, faster payments than Bitcoin’s primary network by offloading these payments onto a “second layer” (a software that is built on top of the original Bitcoin software).

Lightning manages payments through two-way payment channels, where either side holds a certain amount of the funds locked up in a channel. Sending payments outside of a channel requires a “routing” transaction. (Say Alice has a channel with Bob and Bob has a channel with Carol; if Alice wants to send a payment to Carol, she can route it through Bob.

But what happens if Bob doesn’t have enough funds in his channel to complete the payment?

Related: 4 Bitcoin Lightning Network Vulnerabilities That Haven’t Been Exploited (Yet)

This is the problem Pool wants to ameliorate. Businesses or users managing multiple channels can buy liquidity from the marketplace when they need to top off channel reserves for routing. On the other side of this transaction, Lightning Network node operators can employ their idle bitcoin by offering it up as liquidity on Pool. 

“Pool adds market pricing signals to the system so that individuals know where capital is needed. Someone could go on the market and say, ‘I want 1 BTC for 1 month and I’ll pay 3%,’” Lightning Labs CTO Olaoluwa Osuntokun told CoinDesk.

Orders are matched in a “frequent batch auction.” After a window for accepting bids and asks ends, Pool’s engine matches buyers and sellers based on their rates. When the auction block clears, the payments to fund each payment channel are batched into a single transaction to save money on on-chain fees.

“Whenever you put up a bid or ask, you either get that rate or better, depending on the clearing price per batch,” Osuntokun said.

To start, payment channels will have a maximum leasing time of two weeks, or in Bitcoin time, 2016 blocks, though Osuntokun said they will diversify the leasing intervals to up to six months. Liquidity providers will receive fees up-front on their Pool account, but Lightning Labs hopes to implement a “per block interest rate,” wherein interest is paid out instantly to a provider’s Lightning wallet roughly every ten minutes with each new Bitcoin block.

‘LiFi’: Lightning-native financial services

Lightning Labs is marketing the service as a flagship for Lightning Finance or “LiFi,” a way for Bitcoiners to generate non-custodial yield on their bitcoin holdings, as opposed to lending them through a custodian like BlockFi or turning them into wrapped bitcoin for DeFi yield farming.

The service has been in a closed alpha with “many of the major exchanges, wallets, and service providers testing this in the background and to make sure it has enough liquidity on it when it launches.” The maximum order amount at launch will be 10 BTC, though Lightning Labs will raise this in the future once the platform has been sufficiently stress tested.

“In our general style of being more cautious, right now the max account size is 10 BTC. Pool is still early and this isn’t DeFi; we don’t want them depositing a million dollars from day one.”

Related Stories

• Lightning Vulnerability Discovered; LND Node Operators Urged to Upgrade ASAP
• New on Bitcoin’s Lightning Network: LND Adds Accounting Feature, c-lightning Gets an Upgrade