CoinDesk Crypto

News this week that R3 and IBM are working together raised eyebrows, because each entity has been on different and competing sides since the early days of enterprise blockchain.

From next month, the commercial version of Corda (the version big banks and the like are paying R3 for) will be made available via IBM’s LinuxOne servers, delivering a hybrid of on-premise and cloud offerings. R3 announced the news at its annual developer conference, CordaCon.

Blockchain tribalism – R3’s Corda competes with Hyperledger Fabric, the enterprise blockchain heavily backed by IBM – has been put aside in favor of commercial sense, it seems. IBM’s LinuxOne business is far bigger than its nascent blockchain concern, while many large banks that have vendor relationships with IBM use Corda.

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

“This started an interesting conversation in IBM, where LinuxOne came to us and said they wanted to work with us,” Charley Cooper, managing director at R3, said in an interview. “If you’re a highly complex, heavily regulated industry, and you want the best technology but you want the name brands to take to your risk manager to say, ‘Trust us, we’re picking the best vendors,’ now they’ve got the best of both worlds.”

Scrappy contender

The enterprise blockchain space, which attempts to retrofit Bitcoin’s distributed ledger technology within the private settings of big companies, has evolved into three broadly separate camps: R3 Corda, Hyperledger and enterprise variants of Ethereum such as Quorum.

There has been some crossover between these tribes. IBM, for instance, has also experimented with other DLTs such as Hedera Hashgraph, and also with the Stellar blockchain, but the vast majority of Big Blue’s blockchain efforts are focused on Hyperledger Fabric, which is the basis of the IBM Blockchain Platform.

“While there’s some sort of tribalism within the blockchain community, it’s not so in the broader technology community,” said Cooper. “They’re not tribal, they want to see if they can deliver for clients. And if they can, the flavor of blockchain is not a concern for them.” 

Related: Block.one Debuts Big-Business Version of EOSIO Blockchain

R3, while also being a member of Hyperledger, is known to be a scrappy contender when it comes to closing commercial transactions.

New era

Times have changed, said HACERA CEO Jonathan Levi, one of the original engineers working on Hyperledger. The market is moving very fast, and these business networks are becoming specialized, he said.

“R3’s decision to leave the table and to build their own ecosystem on one framework, helped them move a lot faster,” said Levi, referring to the early days with IBM, Intel, Cisco, R3, Fujitsu and others around the engineering whiteboard.

“This is a great moment for our friends R3 and the Corda ecosystem, and for some of IBM’s customers who rely on mainframes,” he added. “I believe that we will see more multi-party systems that rely on open standards and provide more optionality and security by having multiple vendors involved.”

Hyperledger Executive Director Brian Behlendorf said that IBM’s services unit offering support for R3’s product is not unlike its support for Oracle databases or Microsoft operating systems.

“This is yet one more example of what we’ve been saying since our inception, which is that the enterprise blockchain space is really big and will continue to be served by more than one protocol,” Behlendorf told CoinDesk via email.  

There is support for Corda in four different Hyperledger projects, said Behlendorf, pointing specifically to Hyperledger’s interoperability layer, Cactus, which offers an integration toolkit between Hyperledger Fabric, Corda, Quorum and Hyperledger Besu-based networks.

“Congrats to R3 for their continued commercial success, it helps all of us in the enterprise blockchain space,” Behlendorf said.

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Bitcoin has pulled back from 2020’s highs while ether slips as DeFi cools off.

• Bitcoin (BTC) trading around $12,919.97 as of 20:00 UTC (4 p.m. ET). Slipping 1.36% over the previous 24 hours.
• Bitcoin’s 24-hour range: $12,731.06-$13,192.25.

Bitcoin’s price had a minor pullback Friday after hitting fresh new 2020 highs that put it above $13,000 in the past week. However, analysts and traders said they were not surprised at all by the recent moves. 

Read More: Active Bitcoin Addresses at Highest Since 2017’s $20K Price Record

Related: Ethereum 2.0 Deposit Contract Release Kicked Back Until November

An immediate sell-off by long-time bitcoin holders when prices hovered around $13,000 could be why bitcoin struggled to maintain its rally, according to on-chain data site Santiment.

Bitcoin’s dormant circulation, which tracks the activity of bitcoin that were previously unmoved for at least one year, has recorded the biggest spike since Feb. 7, 2020, Santiment’s data shows.

“A renewed activity of long-term BTC investors often means increased price volatility up ahead,” Dino Ibisbegovic, market analyst at Santiment, told CoinDesk. “Similar spikes – particularly during price rallies – have typically earmarked periods of price consolidation or short-term corrections in the past.”

Darius Sit, founder of Singapore-based QCP Capital, told CoinDesk the market may expect further pullback over the weekend, noting that the TD Sequential indicator has been able to signal a reversal for bitcoin prices.

Related: Active Bitcoin Addresses at Highest Since 2017’s $20K Price Record

On the other hand, growing open options interest may support a pricing floor for bitcoin above $12,500, said Guy Hirsch, managing director of U.S. for eToro, in an email to CoinDesk. 

“That price point has long been seen as the glass ceiling that needed to break for BTC to make any significant moves upward,” Hirsch said. “Given the positive sentiment off the back of yesterday’s PayPal news, I would not be surprised to see bitcoin challenged and move back past $13,000 in the near future.”

Additionally, significant institutional interest in cryptocurrency has continued to grow. That is evidenced by the fact that this week the tCME, an exchange predominantly led by institutional participation, has surpassed both Binance and BitMEX to be the second-largest bitcoin futures platform by number of open contracts.

Read More: CME’s Rise in Bitcoin Futures Rankings Signals Growing Institutional Interest

“The PayPal news is the bright and shiny object this week, but it is just the tip of the iceberg,” Matt Hougan, global head of research at Bitwise Asset Management, told CoinDesk. “Behind the scenes there has been a sea change in the attitudes of institutional investors, broker-dealers and financial advisers toward crypto in the past few months.”

“We’re in a legitimate bull market right now,” he added.

Ether slips as DeFi cools off

The second-largest cryptocurrency by market capitalization, ether (ETH), was down Friday trading around $409.05 and slipping 1.78% in 24 hours as of 20:00 UTC (4:00 p.m. ET).

Priced in bitcoin, the token started to reverse some of the gains made mid-Thursday when ETH/BTC spiked 4% in two hours, down 2% from the daily high and trading at 0.0317 BTC per ether and continuing the downward trend since the week’s open for bitcoin-based trading pair.

Ether’s decline against bitcoin may signal a continued cooling of alternate cryptocurrencies (altcoins). Taking to Twitter, leading markets data provider Skew noted ether’s downward trend, asking rhetorically, “Altseason on pause?”

Decentralized finance (DeFi) led the summer’s surge in altcoin returns, and plummeting decentralized exchange (DEX) trading volumes corroborate a potentially significant waning of speculative interest in altcoins, especially DeFi-focused assets. The 30-day trailing volume for leading DEXs is down 41%, according to data from Dune Analytics.

Other markets

Digital assets on the CoinDesk 20 are all red Friday. The bigger losers as of 20:00 UTC (4:00 p.m. ET):

• Zcash (ZEC) – 6.16%
• Dash (DASH) – 5.46%
• XRP (XRP) – 4.09%

Read More: Five On-Chain Indicators Investors Should Follow: Chainalysis

Equities:

• The Nikkei 225 in Asia closed up 0.18% after the final U.S. presidential debate between Donald Trump and Joe Biden ended up much less chaotic compared with the first debate.
• The FTSE 100 also ended the day in the green 1.29% as Barclays beat market expectations by logging a strong third-quarter profit.
• In the United States the S&P 500 gained 0.34% as investors continue to focus on the econonic stimulus negotiations in Washington, D.C.

Commodities:

• Oil was down 2.13%. Price per barrel of West Texas Intermediate crude: $39.482.
• Gold was in the red 0.03% and at $1902.97 as of press time.

Treasurys:

• U.S. Treasury bond yields went down Friday. Ten-year yields, which move in the opposite direction as price, were down to 0.85.

Related Stories

• First Mover: As Bitcoin Tops $13K, Analyst Explains How Blockchain Gives Clues on Next Move
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The Ethereum 2.0 deposit contract is a few weeks away at least, according to Ethereum Foundation researcher Danny Ryan.

Speaking Thursday on the Bankless podcast, Ryan said the deposit contract won’t go live until it receives a thumbs up on an audit of a critical crypto library, BLST, performed by cryptography audit firm NCC Group. 

“This library is critical to creating keys, signing messages. Critical, in early phases, [means] that if you use this library, they need to be secure; if you use it to generate your wallets, it needs to have good randomness; and if you are signing your deposits which have a signature associated, it needs to be correct,” Ryan said.

“Given that how critical this library is, and given that, if there is a fundamental error in this library we could f*ck some sh*t up in terms of genesis deposits, that is the blocker,” he said.

Related: Market Wrap: Bitcoin Pulls Back From $13K While Ether Falls on DeFi Cooling

Read more: Validators Drop Off Ethereum 2.0 Testnets as Mainnet Release Looms

Ethereum 2.0 core researchers are now expecting the deposit contract – a one-way Ethereum smart contract that holds staked ether (ETH) necessary for securing the new Proof-of-Stake (PoS) network – to be released in early to mid-November pending the audit’s findings, Ryan said. 

Ryan said researchers are still eyeing 2020 for the genesis block of the Beacon chain.

The new date comes after multiple client teams who spoke with CoinDesk signaled expectations for an October release of the deposit contract.

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Ripple Labs, the digital asset payment service provider tied to XRP, one of the five largest cryptocurrencies, was blackmailed at the height of crypto mania three years ago, CoinDesk has learned.

Documents obtained by CoinDesk through a Freedom of Information Act request show an unidentified individual emailed Ripple on Oct. 19, 2017, demanding 5 million XRP – then worth $1.1 million – in exchange for withholding videos it claimed portrayed the company in a negative light.

The Federal Bureau of Investigation’s (FBI) San Francisco and Canberra, Australia, offices investigated the extortion attempt from Oct. 23, 2017, to April 20, 2018, according to the documents, which do not describe the content in the videos or whether Ripple paid the 5 million XRP.

Related: Ken Kurson, Trump Family Friend and Ripple Board Member, Arrested on Cyberstalking Charge: Report

The case was closed after there was trouble tracking the extortionist down with just an email address, Internet service provider information and an IP address, a computer or a smartphone’s online fingerprint, the documents say.

Asked about the videos and payment request by CoinDesk, Ripple did not respond by press time and the FBI declined to comment.

The privately held company, co-founded in 2012 by Chris Larsen and Jed McCaleb, the competing Stellar virtual currency’s founder, is eyeing an initial public offering and was the subject of intense market speculation two years ago when the prices of XRP and bitcoin (BTC) shot up in tandem to historic highs.

The market frenzy put targets on the backs of high-profile cryptocurrency companies in 2018, a record-breaking year for exchange hacks and other crimes victimizing them.

Related: Ripple Eyeing Move to London Over XRP-Friendly Stance, CEO Says

Ripple is funded by Andreesen Horowitz, Google Ventures, Lightspeed Venture Partners, Pantera Capital, Accenture, CME Group and IDG Capital plus banks that have layered apps on top of its payment protocol including Santander, SBI Holdings and Standard Chartered.

CORRECT: UTC 20:30 Changes name of Ripple co-founder to Chris Larsen

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The Federal Reserve, the U.S.’s central bank, published a proposed rule change Friday asking about the recording requirements for money transfers involving virtual currencies.

According to the rule change proposal, the Fed and the Financial Crimes Enforcement Network propose modifying the thresholds at which banks must collect and store fund transfer information, reducing it from $3,000 to $250 for any transfers that go outside the U.S. The proposal would also widen the agencies’ definition of “money” to explicitly include cryptocurrencies.

The Fed is seeking public comment, due within 30 days of the proposal being published in the Federal Register, the formal logbook for the U.S. government. Individuals can provide feedback online or via email.

Related: FinCEN Fines Bitcoin-Mixing CEO $60M in Landmark Crackdown on Helix, Coin Ninja

According to the proposal, since the recordkeeping and travel rules were first introduced by the agencies, convertible virtual currencies (or CVC, an umbrella term which includes cryptocurrencies) have been introduced to the world, and while they lack legal tender status, they can still be used to conduct value transfers.

“Generally, CVCs can be exchanged instantaneously anywhere in the world through peer-to-peer payment systems (a distributed ledger) that allow any two parties to transact directly with each other without the need for an intermediary financial institution,” the document said. “However, in practice, many persons hold and transmit CVC using a third-party financial institution such as a ‘hosted wallet’ or an exchange.”

The document pointed to illicit transactions conducted using cryptocurrencies, such as North Korean hacking team Lazarus Group’s efforts to steal crypto, as examples of poor behavior using these new tools.

Recently, a large number of Suspicious Activity Reports (SARs), which banks file to report potentially illegal or suspicious financial transactions, were leaked, revealing that while the federal agency might store this data for years or decades, it doesn’t always take action against banks or entities that might be violating U.S. law.

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The Securities and Exchange Commission said it accepted a settlement offer by Vortex Blockchain Technologies to have its registration revoked for failing to file any periodic reports with the commission since Dec. 31, 2019.

Vortex, which is incorporated in Nevada and headquartered in Des Moines, Iowa, is “a crypto asset holdings company with diverse interests and applications spanning the entire breadth of the crypto universe, in both software and hardware spheres,” according to a description on the company’s website.

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Ken Kurson, a board member of payments firm Ripple and the co-founder of cryptocurrency website Modern Consensus, was arrested Friday and charged with cyberstalking in connection with his divorce, the New York Times reported. 

Kurson, who is a close friend of President Donald Trump’s son-in-law, Jared Kushner, is accused of sending threatening messages to several people, the Times said.

There is also evidence Kurson engaged in installing software on someone’s computer to monitor keystrokes, and reporting false accusations to someone’s employer, the complaint reads, according to the Times.

Related: Ripple Eyeing Move to London Over XRP-Friendly Stance, CEO Says

The accusations reportedly came to light during a routine background check of Kurson for a board seat on the National Endowment for the Humanities. 

Kurson served as editor-in-chief of the New York Observer when Kushner owned it.

A request for comment from Ripple was not immediately returned.

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Chinese officials are cracking down on tether trades. The CME bitcoin futures exchange is heating up, signalling institutional interest. And Kik’s kin token will continue development following a $5 million SEC settlement. 

Top shelf

Ripple, across the pond
Ripple CEO Brad Garlinghouse has given more insight on the company’s possible move away from the U.S., saying the legal status of the XRP cryptocurrency is key. Talking to CNBC Friday, Garlinghouse said his blockchain payments infrastructure company could potentially relocate to London, where the nation’s regulator “clarified” that XRP is not a security and is used like currency. Ripple is currently engaged in a U.S. legal dispute with investors who claim XRP is an illegally issued security. The Securities and Exchange Commission has not been clear on the issue. Switzerland, Singapore, Japan and the United Arab Emirates are also on the table for potential headquarters.

Tether crackdown
Chinese authorities, including the nation’s central bank, have arrested 77 suspects and shuttered three gambling sites said to have “whitewashed” illicit funds using the tether (USDT) stablecoin. Announced over WeChat, the PBoC’s Huizhou office said the suspects had laundered 120 million yuan ($17.95 million) obtained through illegal online gambling activity, in part through USDT. In July, several crypto over-the-counter (OTC) traders were detained in order to assist with state investigation efforts involving illegal economic activity. It is “illegal to open casinos and participate in gambling online,” the PBoC said. “Don’t be curious and lucky. Any ‘disguise’ can’t escape high-pressure supervision.”

Related: First Mover: As Bitcoin Tops $13K, Analyst Explains How Blockchain Gives Clues on Next Move

Institutional interest
The Chicago Mercantile Exchange (CME) has become the second-biggest bitcoin futures platform by number of open contracts, signaling institutional interest. As of Thursday, bitcoin futures contracts worth $790 million were open on the CME, according to data source Skew, topping 15% of the total global open interest. “The CME’s rise is predominantly led by institutional participation, as most entrants from that segment are prohibited from dealing in unregulated derivatives listed on retail platforms such as BitMEX and Binance,” said Matthew Dibb, co-founder of Stack Funds. This happens as rival options exchange BitMEX targets DeFi-focused futures listings, including yearn.finance (YFI). 

Whopping buy
Grayscale Investments has added $300 million worth of cryptocurrencies to its balance sheet in a single day, CEO Barry Silbert tweeted late Thursday evening. The additional sum brings the total held under management to $7.3 billion. “The move comes at a time when the hype surrounding PayPal’s foray into the crypto markets has drawn additional attention from big-name investors including Paul Tudor Jones II,” CoinDesk’s Sebastian Sinclair reports, and follows on the digital asset manager’s best quarterly results to date announced last week. (Grayscale is CoinDesk’s sister firm, both owned by Digital Currency Group, of which Silbert is a founder.)

Kicking back?
Kik’s $5 million Securities and Exchange Commission settlement won’t kill kin, the non-profit behind the token announced. The “cloud of uncertainty has dissipated,” the Kin Foundation claimed in a blog post. With Kik’s remaining treasury and Kin’s reserves, project leaders intend to continue “active development” of the open-source Kin SDK, the new Code wallet and a switch to the Solana blockchain. The foundation also alleged the SEC isn’t considering Kin a security and the judge didn’t find the token in violation of securities laws. Therefore, Kin “should be free to trade on exchanges.”

Most Influential 2020: Cast Your Vote
2020 has not been a good year by most metrics. There is no way to avoid this in a year-end retrospective.

Related: Blockchain Bites: Hodl Hodl’s No-KYC Bitcoin Lending, Voyager’s Token Merging M&A Deal, Crypto’s Reaction to PayPal

Every year, CoinDesk recognizes the “Most Influential” people working to expand cryptocurrency and blockchain’s reach. It’s a list of the 10 outsized individuals who have gone the furthest and done the most.

In this most unusual year, we need your help determining who should be named as Most Influential. Check out the list of the top contenders and cast your vote by Oct. 31.

Quick bites

• DOJ’s Crypto Framework Is ‘a Complete Disaster’ for Digital Privacy Rights (Nikhilesh De/CoinDesk)
• A Guide to Circles, the Project Bringing UBI and FOMO to Ethereum’s xDai Sidechain (Brady Dale/CoinDesk)
• Deadmau5 Livestream Kicks Off Audius Launch Event (Adriana Hamacher/Decrypt)
• Crypto firms have granted millions to Bitcoin developers in recent months. Here's why (Yogita Khatri/The Block)
• Aerospace marketplace VeriTX turns to Algorand to get its supply chain soaring (Adrian Zmudzinski/Modern Consensus)

At stake

What’s immaterial?
In the buzz around PayPal’s announcement to extend crypto trading and transaction services to a third of a billion users, the fintech giant’s negative role in bringing bitcoin to national attention may have been elided. 

Last night, Bitcoin OG Jameson Lopp, tweeted, “9 years ago PayPal paved the way for proving Bitcoin’s value to the world when they shut down WikiLeaks’ account.”

In what was called “potentially the most significant attack on WikiLeaks” at the time, PayPal, then one of the principle means of moving money online, froze the German foundation’s account. This action was a wake up call for some about the dangers of web censorship. 

Satoshi Nakamoto, when creating Bitcoin, had been thinking about financial freedom and the power that banks and payment processors have to revoke it, based on their own contingent, ever-changing and unequally-applied “terms of service.” 

Of course, some of Nakamoto’s last words to early Bitcoin advocates were to resist using bitcoin to fund Wikileaks. He thought the network was too young and fragile to incur the government and public scrutiny that would result from supporting a bank-blocked organization.

It’s with some irony that PayPal has reentered the picture. As reported, the firm’s crypto services will be fully-custodial, fully-KYC’d and will fall under its terms of use. 

So why enter? CoinDesk’s Danny Nelson reported yesterday that Morgan Stanley analysts believe the cryptocurrency community will likely benefit more than PayPal’s bottom line from the services. 

The move “should expand crypto acceptance online, which to date has stalled at 1% of the top 500 internet retailers,” wrote the Morgan Stanley analysts. While the services will “likely [be] immaterial to earnings.”

With rumor saying PayPal is also exploring purchases of cryptocurrency companies including bitcoin custodian BitGo, the question of what is good for crypto becomes more urgent.

Who won #CryptoTwitter? Related Stories

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E-commerce is expected to surpass $4.6 trillion globally by 2022, with the seamless experience of e-wallets boosting its popularity.

MineSpot, a company previously unknown in the crypto mining industry, said it is opening a 160-megawatt mining venue in the middle of Siberia that would be the largest mining farm in Russia.

The venue is located near the Boguchany Dam in East Siberia, in the town of Kodinsk. It will occupy the building and land of a boiler house that used to serve the dam construction site by providing heat to workers building the dam. The construction of the dam, initiated during the late Soviet era, was completed in 2015; the Boguchany Dam is now one of the major hydropower plants in Russia. 

Potential clients of the farm would include both bitcoin and ether miners, said Adam Aushev, co-founder of MineSpot, so the venue will host both SHA-256 application-specific integrated circuits (ASICs) and graphics processing units (GPUs). 

Related: Digital Ruble ‘Promising,’ Pilot Likely in 2021, Says Bank of Russia Chief

Like many other farms in Russia, MineSpot is working as a “mining hotel,” meaning it hosts its clients’ mining machines and charges them for electricity and tech support. It can also purchase ASICs on behalf of its clients, ordering them directly from a manufacturer in China such as Bitmain, Innosilicin or others, and organizing delivery so clients don’t have to manage the logistics themselves. 

The mining valley

With 160-megawatt power capacity, MineSpot is going to become a new competitor to the mining farms already working in the neighboring Siberian cities of Irkutsk and Bratsk, which also rely on hydropower, but from another dam. MineSpot, however, will be the largest one, exceeding the size of the current leader, BitRiver, which has already put ASICs in more than half of its 130-megawatt farm in Bratsk. 

Local logistics might make it more challenging for MineSpot than for its older peers. Aushev admits that it’s not easy to transport ASICs to the site. The road leading from Krasnoyarsk, the nearest large city and transportation hub, to Kodinsk is partly paved with stones, which makes miners worry about their mining machines getting there in one piece. 

“A couple of contracts have already fallen through because of the logistics issues,” Aushev said.

Related: Filecoin Network Upgrade Goes Live, Miners Claim 25% Block Rewards

He is nonetheless optimistic about the firm’s future. Aushev said he plans to get 10 megawatts of MineSpot’s power capacity booked by the end of the year. 

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China’s central bank has included the digital yuan in the latest version of a proposed banking law, giving more legal clarity to the regulation of its national virtual currency. 

The People’s Bank of China is soliciting public comments for the draft of Laws of People’s Republic of China on PBOC until Nov. 23, according to its statement on Friday. 

The proposed law recognizes the renminbi in both physical and digital form. The new version will essentially also clear the way for the digital yuan to be the one and only official yuan-pegged token in mainland China. 

Related: Chinese Authorities Crack Down on Gambling Sites Using Tether Stablecoin

“To prevent risks associated with virtual currency, any other legal entity or individuals can not issue or sell tokens to replace the circulation of Renminbi.,” according to article 22, section 3 in the document. 

Read more: First Users Not Impressed by China’s Digital Yuan: Report

The revision would take a toll on one of the biggest crypto-related businesses in China since many Chinese investors conduct crypto-to-crypto trading with stablecoins. Tether, one of the largest crypto companies, has a yuan stablecoin.

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Active user participation in Bitcoin’s network has accelerated to levels last seen in December 2017, when the cryptocurrency printed record highs near $20,0000.

• The number of active entities, or clusters of addresses controlled by a single network participant, jumped to 388,697 on Thursday, the highest since Dec. 9, 2017, according to data source Glassnode.
• The metric has more than doubled in the past five days alongside bitcoin's rally from $11,350 to $13,300.
• “It shows active participation in bitcoin is growing,” a spokesperson for FCA-regulated crypto index provider CF Benchmarks told CoinDesk.
• “Against the backdrop of PayPal’s announcement this week, it makes a lot of sense that interest in bitcoin is once again intensifying to heights not seen since late 2017,” Odeluga added.
• Online payments giant PayPal announced support for bitcoin, ether, litecoin and bitcoin cash earlier this week, propelling bitcoin and wider crypto market higher.

• The cryptocurrency’s price lags on-chain metrics such as active entities and hash rate.
• While the count of active entities is closing on the record high of 411,127 reached on Dec. 9, 2017, the cryptocurrency’s price is still down 53% from the lifetime high of $20,000.
• Meanwhile, the seven-day rolling average of bitcoin’s hashrate, or the measure of the mining power dedicated to the blockchain, rose to a record high of 146 exahashes per second earlier this month.
• Continued rise in network’s usage could accelerate the price rally.
• “When there’s greater usage, there’s more demand for the cryptocurrency, and that drives the price up,” Philip Gradwell, chief economist at the blockchain intelligence firm Chainalysis, told CoinDesk.

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MOSCOW – Russia’s central bank might pilot its own central bank digital currency (CBDC) at the end of 2021, said the Bank of Russia’s head, Elvira Nabiullina, during an online press conference on Friday. 

“We view this project as promising, it fits into the concept of the digital economy [currently being built in Russia]. We want to evaluate the balance of risks and advantages of such a project before we proceed,” Nabiullina said.

Answering a question from CoinDesk, the central bank executive said the pilot would be carried out with a limited set of users and “might be possible at the end of next year.”

Related: A New Company Claims It’s Opening the Biggest Mining Farm in Russia

The Bank of Russia is currently receiving feedback on its report on the digital ruble published earlier in October, Nabiullina added. The decision whether the digital ruble will be actually launched, as well as whether it will use the blockchain technology, is up for discussion, the report indicated. 

Read more: Digital Ruble Could Be Tool Against Sanctions, Bank of Russia Says

Addressing some of the details of the possible CBDC, Nabiullina said it’s also not yet decided if transactions will be transparent to observers. She stressed, however, that “maximum trust and maximum confidentiality” are key goals for the project. 

The digital ruble, if issued, will not replace or push out other forms of money, physical cash and electronic payments, however. “People will decide for themselves which kind of money for which kind of purposes they want to use,” Namiullina said. Additionally, dedicated financial education programs should be offered to help people understand how to use the digital ruble. 

Related: Philippines Central Bank Governor: No Digital Peso Before 2023

“People and enterprises want fast, convenient, almost immediate payment transactions,” Nabiullina said.

Among the main challenges for the digital ruble, she named the need of robust cybersecurity and the potential feature of the offline use. The Bank of Russia is considering making the digital ruble available offline as well as via the internet, however, there are currently no feasible technological solutions for this, Nabiullina said.

According to the report, the digital ruble will stimulate innovation and competition in the financial sector and help ensure funds allocated to government-backed projects are not misappropriated. 

Read more: Central Bank of Bahamas Launches Landmark ‘Sand Dollar’ Digital Currency

In a later comment to the media, the central bank said the digital ruble could help diminish the dependence of the Russian economy on the U.S. dollar and the threat of the future sanctions on Russia.

The authority is collecting public feedback on the digital ruble report until Dec. 31. An evaluation will follow and and feed into the decision on whether to proceed with a launch. The final decision will only be made after the pilot, the report said.

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Doubts over the the future of the Kin token project from messaging app firm Kik appear to have been dispelled.

• In a blog post Friday, the Kin Foundation, the non-profit set up to govern and promote the project, announced that both itself and the token have survived the recently resolved court battle with the U.S. Securities and Exchange Commission (SEC) over a 2017 initial coin offering.
• Now that Kik has agreed to a $5 million settlement with the SEC, the “cloud of uncertainty has dissipated,” the foundation said.
• “Beyond the monetary fine, Kik’s assets are still Kik’s property, including its remaining treasury, its Kin reserves and all of its intellectual capital, according to the post.
• Kik is further able to carry on with “active development” of the open-source Kin SDK and the new Code wallet.
• The foundation also said that as the SEC isn’t considering Kin a security and the judge didn’t find the token in violation of securities laws, Kin “should be free to trade on exchanges.”
• Going forward, with its reserves still “deep,” the foundation said it plans to continue to grow the Kin ecosystem, bringing on board a new executive director next month.
• Additionally, a planned token migration to the Solana blockchain will go ahead and is “on schedule,” it said.
• Aside from stumping up the $5 million penalty, Canada-based Kik must give the SEC 45 days’ notice before any transactions of the token for the next three years.

Also read: Kik Must Pay SEC $5M, Judge Rules, Ending Yearlong Battle Over $100M ICO

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Bitcoin was higher, just above $13,000 and rising for a seventh straight day – the longest winning streak in six months. 

“A continuation would probably require more positive news,” Matt Blom, head of sales and trading for the publicly traded cryptocurrency firm Diginex, wrote Thursday in a note to clients.

In traditional markets, European indexes rose on positive corporate earnings and strong German manufacturing data, and U.S. stock futures pointed to a higher open. Gold strengthened to $1,911 an ounce.  

Market moves

Related: Active Bitcoin Addresses at Highest Since 2017’s $20K Price Record

A hallmark of the blockchain analysis is that there’s all sorts of data on the distributed computing networks available publicly to anyone with a browser. 

So for crypto traders, why not use the data to get an edge? 

CoinDesk’s Omkar Godbole talked to Philip Gradwell, chief economist at blockchain intelligence firm Chainalysis, about the data points he thinks are most important for crypto traders. 

Below is a condensed list, though Godbole’s full article includes a link to a video of the original interview. 

Related: CME’s Rise in Bitcoin Futures Rankings Signals Growing Institutional Interest

1) Exchange inflows. A surge in a rising market might indicate looming selling pressure, a sign of feeble investor confidence. 

2) Trade intensity. The metric, which measures the number of times an inflowing coin is traded, “tells us how many people are willing to buy bitcoins sent to exchanges,” according to Gradwell. So an uptick is a sign of trend strength. 

3) Interexchange flows. Net flow from crypto-to-fiat exchanges to crypto-to-crypto exchanges suggests the market is dominated by stablecoin traders. In this scenario, a rise in the stablecoin’s issuance could be considered a leading indicator of an impending price rally.

4) Liquidity. A sustained rise in the number of illiquid entities – defined as those that send less than 25% of the assets it receives – is a sign of a strong long-term holding sentiment, and thus a bullish indicator.

5) Value transfers across blockchains. The metric represents usage of the blockchain and is typically accompanied by a rise in the transaction count. “When there’s greater usage of a cryptocurrency there’s more demand, and that drives the price up,” Gradwell said. 

– Omkar Godbole

Read More: Five On-Chain Indicators Investors Should Follow

Bitcoin watch

Bitcoin is eyeing its biggest weekly gain in six months. 

The cryptocurrency is currently trading near $13,000, representing a 13% appreciation on a week-to-date basis, the most since April. 

The Chicago Mercantile Exchange’s share of bitcoin’s futures market has increased alongside the price rally. 

As of Thursday, bitcoin futures contracts worth $790 million were open on the CME, according to data source Skew. That’s 15.8% of the global open interest tally of $5 billion – the second highest contribution among major exchanges.

The exchange’s contribution to global open positions has jumped from 10% to 15.8% this month alone, indicating increased institutional participation. 

From a technical analysis perspective, the focus is on the weekly close (Sunday, 23:59 UTC). If the cryptocurrency finishes above $12,476 (August high), a bullish breakout would be confirmed on the weekly chart. 

That looks likely, as demand for the cryptocurrency is strong. A breakout would strengthen the case for a rally to $14,000 before the year-end. 

– Omkar Godbole

Read More: CME’s Rise in Bitcoin Futures Rankings Signals Growing Institutional Interest

Token watch

Bitcoin (BTC): Hedge fund billionaire Paul Tudor Jones II tells CNBC that bitcoin rally is only in “first inning.”

Tether (USDT): Chinese authorities crack down on gambling sites using dollar-linked stablecoin. 

Ripple (XRP): CEO Brad Garlinghouse says blockchain payments company might move to London amid lingering uncertainty over XRP token’s legal and regulatory classification. 

What’s hot

PayPal (ticker: PYPL) is exploring purchases of cryptocurrency companies including bitcoin custodian BitGo (CoinDesk) 

BitMEX, under scrutiny from U.S. officials, proceeds to list new futures contract on Yearn.Finance’s YFI token, says contracts for polkadot (DOT) and Binance coin (BNB) are on the way. (CoinDesk) 

Bitstamp, European cryptocurrency exchange, names Gemini alum Julian Sawyer as CEO (CoinDesk)

Spanish national police arrest operator of cryptocurrency arbitrage firm that some investors alleged to be a Ponzi scheme (CoinDesk)  

PayPal’s push into digital currencies could benefit mass crypto adoption, Morgan Stanley says (CoinDesk)

Analogs The latest on the economy and traditional finance

Turkish lira weakens toward eight per dollar after central bank declines to raise interest rates to tamp down inflation expectations (FT) 

Goldman Sachs agrees to pay $2.9 billion to resolve probes into 1MDB debacle involving Malaysian financier (CNBC) 

The number of employees globally that permanently work from home is set to double by 2021 (Reuters)

The U.S. Consumer Financial Protection Bureau is seeking to change rules governing the access and use of consumer financial data (Reuters)

Singapore and Germany are setting up a “green lane” enabling travel for business or official reasons amid coronavirus restrictions (Bloomberg)

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Ripple CEO Brad Garlinghouse has given more insight on the company’s possible move away from the U.S., saying the legal status of the XRP cryptocurrency is key.

• Talking to CNBC Friday, Garlinghouse said his blockchain payments infrastructure company could potentially move to London, where XRP is not considered a security by the regulating Financial Conduct Authority.
• The firm may also consider other nations that take a similar stance.
• Ripple is closely tied to XRP, using the token to move value within some of its institution-focused payments products, as well as helping its development.
• In the U.S., though, Ripple is fighting a legal battle with investors who claim XRP is an illegally issued security, while the Securities and Exchange Commission has not been clear on the issue and has been taking actions against some token-based projects.
• “What you see in the U.K. is a clear taxonomy, and the U.K.’s FCA took a leadership role in characterizing how we should think about these different assets and their use cases,” Garlinghouse told CNBC.
• With the FCA “clarifying” that XRP is not a security and is used like currency, it would be “advantageous for Ripple to operate in the U.K.,” he said.
• Ripple is also considering Switzerland, Singapore, Japan and the United Arab Emirates as potential bases, he added.
• The report comes after Ripple’s Executive Chairman Chris Larsen made similar comments early in October, suggesting the firm could abandon the U.S. over its hostile stance toward the cryptocurrency industry.

Also read: Ripple Has Mixed Success in Motion to Dismiss Lawsuit Alleging Securities Fraud

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In sign of increased institutional participation in cryptocurrency, the Chicago Mercantile Exchange (CME) has surpassed prominent cryptocurrency exchanges to become the second-biggest bitcoin futures platform by number of open contracts.

• As of Thursday, bitcoin futures contracts worth $790 million were open on the CME, according to data source Skew.
• That’s 15.8% of the global open interest tally of $5 billion – the second highest contribution among major exchanges.
• The CME was ranking fifth on the list of biggest futures exchanges by open interest on Oct. 1.
• The exchange’s contribution to global open positions has jumped from 10% to 15.8% this month alone.
• At the start of the year, the exchange accounted for a meagre 4% of the global open interest.
• “The CME’s rise is predominantly led by institutional participation, as most entrants from that segment are prohibited from dealing in unregulated derivatives listed on retail platforms such as BitMEX and Binance,” Matthew Dibb, co-founder and COO of Stack Funds, told CoinDesk.
• The CME’s regulated product also offers high standards of compliance that institutions must adhere to.

• While the CME ranked second on Thursday, Malta-based OKEx retained the first place, accounting for nearly 20% of total open interest.
• In the third position was Binance, the world’s largest cryptocurrency spot exchange by trading volumes, which accounted for 14.3% of the total open interest. The controversial perpetuals giant BitMEX ranked fourth.
• Notably, BitMEX’s share of global open interest has declined from 18% to 12% this month in the wake of charges that recently hit the firm in the U.S.
• On Oct. 1, U.S. authoities charged BitMEX with illegally operating an unregistered derivatives-trading platform that accepted U.S. customers, triggering a major outflow of funds from the exchange.

View

• The CME’s share of global futures open interest has risen alongside bitcoin’s three-week rally from $10,500 to $13,300.
• At press time, bitcoin is changing hands near $13,000, representing a 20% gain on a month-to-date basis.
• Bitcoin’s 14-day relative strength index is now reporting overbought conditions with an above-70 print.
• However, in a strong trending market, the indicator tends to stay overbought for a prolonged period and traps sellers on the wrong side of the market.
• Disclosure: The author holds small positions in bitcoin and litecoin.

Also read: Hedge Fund Billionaire Tudor Jones Says Bitcoin Rally Only in ‘First Inning’: Report 

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Analyzing cryptocurrency markets may seem easier than traditional markets because blockchain technology has more built-in transparency, enabling anyone to analyze and audit on-chain data.

Simultaneously, however, there are challenges to zeroing in on forward-looking numbers that give insights into current and future price trends. Philip Gradwell, chief economist at the blockchain intelligence firm Chainalysis, joined CoinDesk earlier this week to discuss the five must-track on-chain indicators for all traders.

Exchange inflows

“The first indicator that I look at every day is exchange inflows,” Gradwell said. 

Related: Traders Rotate to Bitcoin Expecting a Quiet Q4 for Altcoins

Investors typically transfer coins from their wallets to exchanges when they want to liquidate their holdings and take direct custody of their holdings when they have a bullish view on the cryptocurrency. 

A surge in inflows in a rising market could be considered a sign investors lack confidence in the uptrend. “When you see large inflows, it’s time to be cautious,” Gradwell added. 

Also read: Bitcoin Risks Deeper Price Pullback as Exchange Inflows Spike

Nonetheless, inflows do not imply immediate liquidation. Investors can hold their coins on exchanges for as much time as they want. 

Related: CFTC Charges Firm With Illegally Providing Leveraged Trading of Crypto, Gold

“Historically coins have been liquidated with a lag of 12 to 36 hours,” Gradwell said, adding that during the March crash there was panic selling. 

Thus, this indicator is just one piece of the puzzle because we don’t know when the transferred coins will be sold. What’s more an uptick in inflows or selling pressure is often matched by an equal or more substantial buying pressure. 

Trade intensity

To determine the impact of exchange inflows on the supply side, investors should keep an eye on the demand side with the help of the “trade intensity” metric, which measures the number of times an inflowing coin is traded.

“It tells us how many people are willing to buy bitcoins sent to exchanges,” Gradwell said. An uptick in trade intensity shows that buyers are outweighing sellers and it is a sign of trend strength. 

Bitcoin jumped over 7% to 15-month highs above $12,300 on Wednesday. Amid the price rally, cryptocurrency exchanges tracked by blockchain intelligence firm Chainalysis received a total of 106,519 BTC on Wednesday, the highest daily inflow since Oct. 2.

However, the rise in inflows failed to apply the brakes to the price rally because demand was strong. Bitcoin’s trade intensity jumped to a two-month high of 5.8, more than double the 90-day average.

Also read: Back at $13K: Bitcoin Unfazed by Profit Takers After Rise to 2020 High

While exchange inflows and trade intensity help gauge short-term market conditions, the remaining three indicators are more about long-term trends.

Interexchange flows

Investors can buy cryptocurrencies with fiat currencies like the U.S. dollar or use dollar-backed stablecoins like tether to fund purchases. 

Crypto-to-fiat exchanges facilitate the exchange of dollars for cryptocurrencies, while at crypto-to-crypto exchanges stablecoins are used as a gateway to crypto trading. 

Investors can determine whether the market is driven by fiat buyers (such as institutions) or tether traders by keeping track of net flows between these two types of exchanges. 

Net flow from crypto-to-fiat exchanges to crypto-to-crypto exchanges suggests the market is dominated by stablecoin traders. In this scenario, a rise in the stablecoin’s issuance could be considered a leading indicator of an impending price rally.

However, that, too, isn’t set in stone. Since March, crypto-to-fiat exchanges have received 206,000 BTC from crypto-to-crypto exchanges, according to Chainalysis. “It indicates that fiat buyers have mainly driven the market,” Gradwell noted, adding that the data confirms the bullish narrative of rising institutional participation in the top cryptocurrency.

Liquidity

Investors can gauge the hodling sentiment in the market by keeping track of the number of liquid and illiquid entities – clusters of addresses controlled by the same participants in a network. Chainalysis identifies entities by analyzing blockchain transaction patterns to identify which addresses are controlled by a single person or business. This gives a more accurate picture of what is going on as the data better reflects actual holdings and transfers between people and business, reducing the noise of internal movements of cryptocurrency.

Liquidity is the average ratio of net to gross flows of an entity’s assets over the entity’s lifetime, across all addresses controlled by the entity. Chainalysis defines a liquid entity as the one that sends on average at least 25% of the assets it receives, while an illiquid entity is the one that sends on less than 25% of its received assets.

Essentially, an illiquid entity is the one that appears to believe in the cryptocurrency’s long-term prospects and hoards coins. That has a weakening effect on selling pressure in the market. For that reason, a sustained rise in the number of illiquid entities is a sign of strong hodling sentiment and a bullish indicator. 

The above chart shows the liquidity of bitcoin has declined to the lowest level since mid-2017. Bitcoin’s meteoric rise from $5,000 to $20,000 that happened in the final quarter of that year. 

Also, the amount of illiquid bitcoin has risen sharply. “It’s been increasing at a greater rate this year than it did before. So you’ve got more investors than ever before. But there’s also fewer bitcoin that are liquid and available to buy than ever before,” Gradwell said. 

That possibly the reason why bitcoin recently held steady above $10,000 despite the BitMEX indictments, KuCoin hack, OKEx private key drama, U.S. President Donald Trump’s health scare and a global stock market sell-off.

Value transfers across blockchains

Value transfer refers to the U.S. dollar value of total units on a blockchain that are transferred on a given day. It essentially represents the usage of the blockchain and is accompanied by a rise in the transaction count. 

“When there’s greater usage of a cryptocurrency there’s more demand, and that drives the price up,” Gradwell said. 

Ether’s value transfer began rising sharply in mid-July. A week later, the cryptocurrency picked up a strong bid around $250 and ended up rallying to $470 by mid-August. Ether led the broader market higher in July and August and outshined bitcoin by rallying 53% and 26%, respectively. 

Up until last year, bitcoin pretty much led the broader market in both bull and bear runs. Most investors would buy ether and other alternative cryptocurrencies during bitcoin’s bull run and sell those other cryptocurrencies when bitcoin was on the downturn.

However, the dynamics have changed this year with the explosive growth of the Ethereum-based decentralized finance protocols, making it imperative for investors to track on-chain activity of ether and other coins. 

As crypto markets continue to grow and mature, demand for deeper on-chain analytics is likely to increase. “With on-chain data, there is an amount of work that needs to be done first, to go from raw blockchain concepts like an address to a more meaningful economic concept like the flow into an exchange. But once it’s done, the user has a meaningful data set to act on and make decisions,” Gradwell said.

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BitMEX’s latest futures listings bring another decentralized finance (DeFi) product to the cryptocurrency derivatives space.

• According to a company blog post Friday, the Seychelles-based exchange said it was adding DeFi token yearn.finance (YFI) to its quanto futures contracts.
• Polkadot (DOT) and Binance coin (BNB) contracts are also on the way.
• All three contracts will be paired against the dollar-linked tether (USDT) stablecoin.
• Currently live on BitMEX’s testnet, the products are slated to start trading on Oct. 30 at 04:00 UTC.
• Yearn.finance is currently the ninth largest DeFi protocol, with $458 million locked up in liquidity, according to DeFi Pulse.
• It sets out to be the gateway to a range of yield-generating products.
• Meanwhile, DOT is the native token of Polkadot, a protocol for connecting decentralized applications and services, and BNB powers the ecosystem of cryptocurrency exchange Binance.
• “These three contracts aim to provide our users with quality coverage of highly liquid products,” BitMEX said.
• The exchange rarely lists new contracts: last month it announced upcoming listings for Chainlink and Tezos futures, the first additions for two years.
• BitMEX was recently charged by U.S. authorities for allegedly facilitating unregistered trading.
• It’s since undergone a major leadership shakeup and brought in its first chief compliance officer.
• This week, the company brought forward a mandate for all customers to verify their identities by Nov. 5, three months earlier than planned.

See also: BitMEX Accelerates Mandatory ID Verification After Charges of Lax Anti-Money Laundering Controls

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A local branch of the People’s Bank of China (PBoC), in conjunction with other Chinese authorities, has conducted mass arrests and shut down online gambling sites for activities involving the tether (USDT) stablecoin.

• Announced Thursday in a statement by the PBoC office in Huizhou city, 77 suspects have been arrested and three gambling sites have been shuttered.
• The announcement came via the central bank’s official WeChat account and was confirmed to CoinDesk by a source who requested anonymity.
• The arrests were made over alleged money laundering in which “whitewashing” was used to hide funds obtained through illegal online gambling activity, including through USDT, a cryptocurrency linked to the value of the U.S. dollar on a 1:1 basis.
• The total amount involved in the alleged laundering is said to be around 120 million yuan ($17.95 million)
• It is “illegal to open casinos and participate in gambling online,” the PBoC said. “Don’t be curious and lucky. Any ‘disguise’ can’t escape high-pressure supervision.”
• In July, crypto over-the-counter (OTC) traders were detained in order to assist with state investigation efforts involving illegal economic activity, however, at the time, no arrests were made.
• The gambling arrests come as the PBoC is closing on the launch of its “digital yuan” central bank digital currency.

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

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