CoinDesk Crypto

U.S. exchanges ErisX and bitFlyer are among 12 crypto firms selected to pilot Hawaii’s digital currency regulatory sandbox that will allow virtual asset service providers to do business in the state without obtaining a money transmitter license for a two-year period, the companies announced Wednesday.

• The pilot program, offered through the Digital Currency Innovation Lab, a partnership between Hawaii’s Department of Financial Institutions (DFI) and Hawaii Technology Development Corporation (HTDC), marks the return of crypto firms to the state and is the first regulatory sandbox of its kind in Hawaii, according to a statement from ErisX. 
• Although the DFI didn’t exactly ban crypto when the state implemented the “double-reserve requirement” in 2017 – which required companies to hold reserves in fiat currencies matching the amount of crypto held by their clients – exchanges like Coinbase said "aloha" to the state, leaving because they saw the requirement as a costly burden. 
• But in January 2020, Hawaii introduced a bill that would allow financial institutions to hold digital assets.
• In March, the state went a step further to potentially relax the stringent rules for virtual asset service providers by launching the Digital Currency Innovation Lab to address the heavy regulatory requirements and “create economic opportunities for Hawaii through early adoption of digital currency.”
• According to ErisX General Counsel Laurian Cristea, following the launch of the lab, Hawaii invited crypto firms to apply for participation in the pilot program. 
• With the addition of Hawaii, ErisX, which pioneered crypto futures trading in the U.S., is now operational in 49 out of 53 possible U.S. states and territories, according to the exchange.
• In a statement to the press, global crypto exchange bitFlyer, whose U.S. affiliate is headquartered in San Francisco, said the “sandbox initiative marks the return of crypto exchanges to Hawaii, with the ultimate goal of seeing exchanges such as bitFlyer promoted to full licensees in the future.”
• The full list of participants includes BlockFi, CEX.io, Apex Crypto, Cloud Nalu, Coinme, Flexa, Gemini, Novi, River Financial and Robinhood Crypto.

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Institutional demand for stablecoins may cool because yield on “carry trades” has been cut in half since Monday.

The annualized rolling one-month futures basis shot as high as 28% at the start of the week on the Malta-based cryptocurrency exchange OKEx, the biggest in terms of open interest. That was the highest premium since February, according to data provided by the crypto derivatives research firm Skew.

That premium, however, dropped to 14% in under 48 hours. In other words, the carry strategy, if initiated now and held until next Friday, will yield an annualized return of 14%, down from 28% on Monday.

Related: Market Wrap: Bitcoin Sinks to $11.6K as Ether’s Gas Keeps Rising

Carry trading, or cash and carry arbitrage, is a market-neutral strategy, one that seeks to profit from both increasing and decreasing prices in one or more markets. It involves buying the asset in the spot market and simultaneously selling a futures contract against it when the futures contract is trading at a premium to the spot price.

See also: Bitcoin Price Holds Below $12K Even as Hashrate Hits All-Time High

The premium, however, evaporates as the futures contract nears expiration and on the day of the settlement, the futures price converges with the spot price. Should futures draw high premiums, savvy traders initiate a carry strategy and lock in fixed returns.

Futures markets usually trade at a premium to the spot market and the spread tends to widen during price rallies. The annualized premium rose roughly from 9% to 27% in the last two weeks of July as bitcoin’s price rose from $9,000 to $12,000 and it remained near that level going into August. 

Related: Bitcoin’s Bull Run Is Slowing – Pullback Now Expected

Traders could have locked in an annualized profit of 28% on Monday by buying bitcoin in the spot market and selling the front month futures contract on OKEx. Doing that trade now would still profit, but by only half as much.

The decline in the carry strategy yield could also mean a cut in  demand for dollar-backed stablecoins like tether (USDT).

“Stablecoins are widely used as funding currencies and there has been a high demand for these dollar-backed cryptocurrencies from institutions,” Skew CEO Emmanuel Goh told CoinDesk in a Telegram chat. Indeed, the carry trade has been one of the main reasons for the surge in stablecoin issuance seen this year.

On Monday, the annualized cost of borrowing tether on the decentralized finance protocol Compound was 6.94%. Assuming carry traders borrowed USDT from Compound on Monday, holding the carry strategy until the August expiry, due next Friday, would generate a net yield of about 21% in annualized terms. (return of 28% from cash and carry adjusted for tether’s borrowing cost of 6.94%).

See also: First Mover: Money Legos Turn ‘Exuberant’ as Chainlink Stripped of ‘DeFi’

If the same strategy were executed at press time by borrowing USDT, the net yield would be 6.3%. That’s because the cost of borrowing USDT is now 7.68% and the OKEx futures are trading at a premium of 14%. Put simply, carry trades have become far less attractive. As such, institutional demand for stablecoins could soften, as noted by Skew. 

The premium has declined sharply in the past 48 hours, possibly due to bitcoin’s failed breakout above $12,000 and resulting concern of deeper price pullbacks. The decline in premium may have been compounded by increased selling in futures as more traders piled into the cash and carry trade.

Whenever futures trade at discount to spot prices, traders execute reverse cash and carry trade by buying futures and taking a short position in the spot market. 

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Investors in the 2017 Paragon Coin token sale want their money back, but they can’t find the celebrity couple behind the operation.

“The attorneys representing the defendants have withdrawn as counsel,” said attorney Donald Enright, who represents plaintiffs in this crypto-fueled legal dispute. Enright added the defendants “defaulted” by failing to appear in court and respond to the claims. 

The Northern District of California decided in the infamous initial token offering (ICO) case Davy v. Paragon Coin, Inc. that token buyers trying to sue the project’s founders may qualify as a class to pursue a collective case. The lawsuit claims the token sale was an illegal securities offering and that buyers are entitled to a refund of their investment or compensatory damages. The defendants’ former counsel, attorney Howard Schiffman, declined to comment other than to say his law firm hasn’t worked with or heard from the accused in “years.”

Related: Sirin Labs Founder Sued Over Unpaid $6M Factory Bill for Finney Blockchain Phone

His counterpart, Enright, said that doesn’t mean the case is over.

“Once we have the class certified we will then seek default judgment on behalf of the entire class for all of their damages,” he said, “for the full value of the Paragon ICO.”

Paragon raised roughly $12 million in digital assets during the token sale, according to litigation filings from the U.S. Securities and Exchange Commission (SEC).

The legal saga underscores the lasting hangover of 2017’s initial coin offering (ICO) craze, at a time when token sales are again surging in popularity.

Influencer game

Related: Appeals Court Backs Coinbase in Bitcoin Gold Fork ‘Breach of Contract’ Lawsuit

The project appears to have been helmed by Jessica VerSteeg, a former beauty queen from Iowa who went on to appear in reality TV, and her husband, Russian entrepreneur Egor Lavrov. 

But the defendants listed in court documents also include a hip-hop star.

Jayceon Terrell Taylor, aka “The Game,” who promoted the Paragon ICO on social media, was also named in the suit. Also named are technologists Eugene Bogorad, Alex Emelichev, Gareth Rhodes and Vadym Kurylovich. Most of the above-mentioned defendants could not be reached for comment by press time. 

“Paragon offers everything from a cryptocurrency (ParagonCoin, traded as PRG) to a blockchain solution (ParagonChain) designed to expedite and digitize the marijuana supply chain,” a Forbes contributor wrote in July 2018. “Now, VerSteeg’s latest venture is Paragon Space, Los Angeles’ first cannabis co-working space set to open on September 1.”

It’s unclear if any of the project’s stated plans would have materialized had it not been for legal action from the SEC in 2018.

One of Paragon’s early contributors, who spoke on condition of anonymity, said he’s not concerned about future lawsuits because the team already obeyed the SEC by paying a penalty fee. It’s unclear whether the full fee was paid because, as of November 2019, the Wall Street Journal reported the Paragon team missed some of the deadlines to pay these fines. 

Read more: SEC-Fined Crypto Project Abandons Cannabis Co-Working Venture

Both of the interviewed defendants from the Paragon case were not U.S.-based and said they weren’t concerned about being named in any ongoing lawsuit. As for American defendants and former legal counsel, aside from the above-mentioned Schiffman, their offices were closed due to COVID-19 or they did not otherwise respond to emails and voicemails by press time. In fact, VerSteeg and Lavrov haven’t been heard from since last year. 

“As far I know, Egor is not responding to any messages and that’s all I know,” Bogorad, the project’s former chief strategy officer said, having only heard about legal trouble through the press. “I went back to Moscow. October 2017 was the last time I saw him. We were actually asking him [in 2018] about our tokens.”

The couple was still promoting Paragon throughout 2018, although they were rarely responsive to their former colleagues. The SEC fined the entrepreneurs in early 2019. Most of the couple’s old websites and social media accounts haven’t been active since mid-2019, when they posted on Instagram in July from Kiev, Ukraine. 

“I think they’re together and disappeared together,” Bogorad said. “Last we heard from them they were visiting the development team near Kiev.” 

ICO aftermath

If the class-action lawsuit proceeds, it’s unclear how the courts will find VerSteeg and Lavrov. As for the early contributors who haven’t gone missing, Bogorad says they never intended on starting the Paragon company themselves.  

According to Bogorad, a long-time friend of Lavrov’s from Moscow, where they both worked in Russian political campaigns in 1999 and 2000, many of the people listed in the lawsuit don’t consider themselves Paragon Coin’s founding team. 

Read more: The Bitcoiners Who Live ‘Permanently Not There’

He said Lavrov invited a group of roughly five people, plus VerSteeg, to a hacker house in California in 2017. They were paid in fiat or bitcoin, with the promise of future tokens as well, but didn’t see themselves as running a company. He said he was merely helping Lavrov with marketing to launch his company. Another team would be hired to run the company after the sale, Bogorad said. 

“Once we finished the white paper and the ICO started I helped with the marketing, it was July to August 2017,” Bogorad said. “I wasn’t connected to the Facebook and Google advertising, which was the biggest cost-driver.”

The hacker-house team focused on marketing to bitcoin groups on Facebook, Bogorad said, while two guys focused on customer support and VerSteeg handled media outreach, including promotion with her friend The Game. 

In 2017, VerSteeg gave joint interviews with IOTA co-founder David Sonstebo, who said “the beautiful thing about the Paragon project is they are combining the technologies that actually make sense.” When asked about VerSteeg in February 2020, the press team that arranged the interviews said they hadn’t heard from VerSteeg in years and Sonstebo said the IOTA Foundation wasn’t really involved in the ICO project.

‘Paragon became toxic’

After the sale concluded, the California hacker house split up, mostly returning to Russian-speaking Europe. 

None of the responsive participants in the sale, neither sellers nor buyers, could say exactly how much was raised. Bogorad estimated it was less than $15 million. The sale’s Etherscan data suggests relevant wallets were last active a few times back in August 2019, weeks before Bogorad last heard from VerSteeg and Lavrov. 

Read more: After Friday’s SEC Actions, Experts Say ICO Party ‘Is Truly Over’

The anonymous ICO participant, who said Lavrov invited him to visit California for a short-term project in 2017, just like Bogorad, added that he didn’t enjoy working with these token founders and hopes to never see them again. 

“Paragon became toxic. I’ve avoided any relations for more than one year,” he said.

The anonymous participant said this lawsuit is “just lawyers trying to spam courts.” He declined to specify which crypto projects he might be using or participating in these days. Meanwhile, Bogorad is still (informally) involved with token projects like Free TON, a fork of the folded Telegram blockchain project that was nixed by U.S. regulators. But he added he’s not a founding member of Free TON, just “highly enthusiastic about the project.”

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Russian communications giant Rostelecom has finally published details about its blockchain-based voting system that will be deployed for by-elections in September.

There will be two blockchain voting pilots in different regions of the country next month. One will be run by Rostelecom, the state-owned major telecom provider, and the other by the Department of Information Technologies, a branch of the Moscow city hall that ran the previous blockchain voting pilots.

The platform by Rostelecom will be used for remote voting on Sept. 13 in two Russian regions, Kurskaya and Yaroslavskaya areas, where the residents will vote to fill the vacant seats at the Russian national parliament, the State Duma.

Related: Barclays’ Former Russian Bank Has Issued a Token-Collateralized Loan

The system will be based on the private enterprise version of the Waves blockchain. According to the press release circulated Wednesday by Rostelecom and Waves, the system will allow for “control by all authorized participants of the elections, including independent observers.”

Read more: Russian Voters’ Data on Sale After Blockchain Poll to Keep Putin in Power: Report

However, the nodes of the blockchain will be located on Rostelecom servers exclusively, and for security reasons there won’t be a way for independent observers to run their own nodes, Rostelecom’s press person Natalia Bakrenko told CoinDesk.

Waves CEO Sasha Ivanov said observers will still be able to watch what’s going on: “All information from the enterprise voting chain will be published on a special portal that can be accessed by anybody. Cryptographic instruments guarantee that the data cannot be tampered with.”

Related: Russia, With Bitcoin Playing Bit Part, Tried to Hack 2016 US Election, Senate Report Finds

Despite the rough experience of previous blockchain-based voting in Russia, it remains a good business for Waves, Ivanov told CoinDesk:

“Voting has always been one of the most low-hanging fruit for blockchain technology implementation. It is extremely important for us to participate in launching one of the first large scale projects implementing blockchain beyond monetary applications,” Ivanov said.

Rough history

Rostelecom announced the further expansion of the blockchain voting experiment in July, after the technology was used for voting on controversial constitution amendments.

The process did not go smoothly. Journalists in Russia reported finding a way to decrypt people’s votes and retrieve personal identification numbers out of a weakly protected service file. After the voting, dark web vendors offered personal data of the voters for sale, although public officials denied the authenticity of the data.

The system was built on Bitfury’s open-source Exonum blockchain with the help of Kaspersky Lab, according to CoinDesk’s sources, although the anti-virus company did not confirm that.

Read more: Hacker Attempts to Disrupt Russia’s Blockchain Voting System

The first blockchain voting experiment in Russia took place in the fall 2019 during local elections in Moscow. Residents could vote electronically using an Ethereum-based system, which was criticized for weak security.

Blockchain voting has been under the purview of Moscow city’s Department for Information Technology (DIT). Now, there will be two parallel pilots, one by DIT and one by Rostelecom.

DIT is not backing away from the blockchain voting project, the press person told CoinDesk. In November, it will provide the blockchain-based system for the municipal elections in two Moscow districts.

Related Stories

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The OCC is willing to work with banks interested in custodying crypto, a Russian bank approved a token-backed loan and bitcoin has been sent… from space!

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Top shelf

Next steps?
The Office of the Comptroller of the Currency’s interpretative letter last month allows banks to provide services to crypto companies and custody cryptocurrencies directly – a sea change that could have been months in the making, writes CoinDesk regulatory reporter Nikhilesh De. It doesn’t appear banks have jumped at the news. However, the letter is just the beginning of a longer process. The OCC will interact with banks on their next steps if they do decide to pursue crypto services. These letters help banks interested in crypto determine if it makes sense for them to get involved in the space, the OCC’s Jonathan Gould said. 

Related: First Mover: Money Legos Turn ‘Exuberant’ as Chainlink Stripped of ‘DeFi’

BTC in space
SpaceChain’s International Space Station-hosted (ISS) hardware secured a bitcoin transfer while floating in Earth’s orbit. Using a multi-signature transaction hardware, the firm’s Chief Technology Officer Jeff Garzik authorized a 0.0099 BTC (about $92 at the time) transfer on June 26, the company disclosed Tuesday. Data can only reach the ISS via the craft’s encrypted ground station links. SpaceChain says this adds security and resilience to transaction authorizations.

Prime brokerage
Bequant is entering the prime brokerage space by building a crypto exchange, reports CoinDesk’s Nathan DiCamillo. “Prime brokers are facilitators for financing and trading for deep-pocketed institutional investors. While the digital asset space doesn’t have a lot of prime broker options currently, several crypto firms including Coinbase, BitGo and Genesis Trading have announced in recent months their intent to build prime brokerage wings,” he reports. 

Token loan
Expobank, a former Barclays subsidiary in Russia, has issued a loan using tokens as collateral. Terms were not disclosed, but the loan was made to tax consultant Mikhail Uspensky, who bought WAVES in 2018 for a planned initial coin offering (ICO). The tokens are being held by a third-party notary. Expobank’s dabbling in token collateralized loans comes after Silvergate said it had issued a total of $22.5 million worth of loans collateralized by bitcoin in July. The California bank only started offering such loans to clients in January.

Private nodes
Decentralized privacy startup HOPR has released its first “customized HOPR Hardware Node,” which the startup says removes any reliance on cloud servers predominantly controlled by Amazon and Alibaba. HOPR uses a token-incentivized mixnet solution, essentially doing the same for blockchain as Tor (the onion router) or a virtual private network (VPN) do on the internet. The mixnet node combines running an Ethereum node with next-level data privacy.

Quick bites

• Riot Blockchain is buying 8,000 more bitcoin miners (Danny Nelson/CoinDesk)
• A U.S. Senate report found, among other things, that bitcoin was a factor in Russia’s meddling in the 2016 U.S. presidential election. (Danny Nelson/CoinDesk)
• First Mover: Money Legos turn “exuberant” as Chainlink stripped of “DeFi” (First Mover/CoinDesk)
• Investor revolt and legal dispute delay Filecoin plans (Dan Primack, Kia Kokalitcheva/Axios)
• Steem vs. Tron: The rebellion against a cryptocurrency empire (Tim Copeland/Decrypt)

At stake

Related: Blockchain Bites: Hashrates Drop, Bitcoiners Hodl and an Open Letter to Bankers

What’s going on in the world of DeFi? The pace of development in this small corner of the crypto space can be difficult to follow. Since the end of May, total locked-in value exploded past $1 billion and now sits near $6.4 billion, according to DeFi Pulse.

A whole universe of meme-driven and meta-referential projects have launched, grabbed headlines and filled their coffers. Here’s a quick rundown on a few recent projects.

For instance, the governance token for yEarn.finance (YFI) has shot up over 32,000% in about a month, CoinDesk’s Paddy Baker reports. Investors have dropped $645 billion into the application. 

yEarn founder Andre Cronje said the price rise likely came from a combination of scarcity – there are only 30,000 YFI tokens – and the fact traders were using YFI in some of the other DeFi protocols.

While yEarn has delivered an actual product – an algorithm that identifies and executes various DeFi trading strategies – with up to 95% ROIs, many projects are to be taken less seriously. 

Spaghetti Money, less than a day old, has already attracted $200 million in its protocol, which features a meme coin (PASTA), no public figurehead or governance model – and which has yet to be audited. 

Gamblers on the decentralized betting site Prediqt think Spaghetti will attract a total of $500 million TVL within the first 36 hours.

Finally, Binance subsidiary WazirX, the Mumbai-based crypto exchange, announced it is developing a DeFi product with Matic Network, a blockchain scalability platform. 

The project promises an automated money market, similar to the popular Ethereum-based Uniswap, to run on Matics’ “high speed” blockchain. The decision to opt for Matic was influenced by high gas fees on Ethereum, fees which are in part being driven northward by DeFi. 

Market intel

Uptrend upturned?
Bitcoin’s uptrend since mid-March appears to be running out of steam. “Monday’s breakout of $12,000 was almost entirely short-squeeze driven, and the resultant failure just ahead of larger offers [sell orders] at $12,500 has solidified the price range of $12,000-$12,500 as a key resistance area for an extended period,” QCP Capital said. The cryptocurrency dropped below $12,000 Tuesday, and chart analysis shows signs of bullish exhaustion, according to CoinDesk markets reporter Omkar Godbole. 

Tech desk

Dust settles
“Dust” is the technical term given to trace amounts of bitcoin – usually no more than a few  hundred satoshis – that are considered too small to send in a transaction because the transaction fee would exceed the amount sent. The dust settles in a wallet, potentially allowing for nefarious actors or blockchain researchers to deanonymize the address. Dave Jevans, the CEO of blockchain analytics company CipherTrace, said that “hackers may use dusting as a strategy for identifying individuals who can then be phished or extorted.” Researchers and developers are working on solutions, including raising “dust limits” or consolidating unspent UTXOs, each with their own drawbacks. 

Op-ed

A new internet
Steven McKie, a founding partner and managing director at Amentum Capital, is developing, investing in and calling for others to build the “new internet.” The decentralized web’s development is made all the more necessary considering the privacy leaks, censorship and control centralized internet services exert. “Although the solutions to censorship resistance, lack of privacy and trust are right around the corner, further experimentation and development of the DWeb meme is necessary before the final barriers to the New Internet are sprung open,” he writes. 

Podcast corner

Cheap money
Race Capital’s Chris McCann joins the latest edition of The Breakdown for a conversation about fintech, low interest rates and how cheap capital changed the face of Silicon Valley. 

Who won #CryptoTwitter? Related Stories

• First Mover: Bitcoin Passes $12K, Dollar Worries Grow, OMG Jumps, Portnoy’s Orchid #Pump
• Blockchain Bites: Bitcoin on DeFi and DeFi on Bitcoin

Cynthia Lummis, a former U.S. Representative and current bitcoin advocate, has won her primary race to join the U.S. Senate representing Wyoming.

• Lummis beat nine other Republican candidates on Aug. 18, and has now advanced to the general election against Democrat Merav Ben-David. Lummis is favored to win in a “Solid Republican” district, according to the Cook Political Report.
• Lummis previously told CoinDesk she has been interested in bitcoin since at least 2013, seeing it as a stable source of value, unlike the U.S. dollar.
• Lummis served in the U.S. House of Representatives between 2009 and 2017.
• Should Lummis win, she may become one of the most crypto-friendly lawmakers in the legislative body.

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• UK Regulator Grants License to Digital Security Exchange Archax
• $200M Staked in YAM-Inspired DeFi Protocol in Under 12 Hours
• Riot Supercharges Mining Ops With 8,000 More Bitmain Rigs as Bitcoin Price Soars
• Blockchain Privacy Firm HOPR Releases Mixnet Hardware Node for Ethereum

Data provider Chainlink will provide decentralized weather data for insurance startup Arbol, according to a blog shared with CoinDesk.

Arbol provides crop insurance for small to medium-sized farmers or enterprises. Smart contracts pay claims to subscribers when a preset value – such as the average monthly temperature or rainfall – turns out different than the contract specifies, the firm said.

Called parametric insurance, the financial derivative is often used in agriculture to hedge against future events, such as a bad harvest. Other firms, notably CME Group, also offer weather derivatives that require middlemen.

Related: First Mover: Money Legos Turn ‘Exuberant’ as Chainlink Stripped of ‘DeFi’

Arbol insurance, on the other hand, self-executes using a mix of smart contracts and Chainlink data – no holdups on payments.

Read more: How DeFi Could Disrupt Traditional Finance, Feat. Sergey Nazarov

“Users are able to create derivatives on the blockchain that pay out based on weather outcomes. This allows weather-exposed entities like farmers to hedge their weather risk,” Arbol said in the blog.

The startup launched out of stealth in April after raising $2 million in a 2019 seed round, according to Crunchbase.

Decentralized weather data

Related: Market Wrap: Bitcoin Slides to $11.8K; Uniswap at $7M in Monthly ETH Fees

Chainlink pipes data from the National Oceanic and Atmospheric Administration (NOAA) and other sources, the blog states.

Tamper-resistant data is necessary for parametric insurance products that don’t require middlemen, Arbol founder and CEO Siddhartha Jha told CoinDesk in a phone interview. 

Arbol’s application is built on Ethereum smart contracts and also secures data via the Interplanetary File System (IPFS), according to a recent Arbol blog. The firm currently operates in the United States, Cambodia and Costa Rica.

Chainlink first presented decentralized data networks, known as oracles, as agnostic reporters for insurance companies up to four years ago, Chainlink founder Sergey Nazarov said in a telephone interview.

Related Stories

• Blockchain Privacy Firm HOPR Releases Mixnet Hardware Node for Ethereum
• Chainlink Up Nearly 1,000% Since ‘Black Thursday’ Crash

Price Point

It’s been two steps forward, one step back for bitcoin (BTC) over the past couple months.

Prices were down early Wednesday for a second straight day after pushing earlier this week past $12,000 to a new 2020 high. The price move accelerated as traders got hit with margin calls on the BitMEX exchange. 

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

Related: Chainlink to Provide Data for Farming Insurance Startup Arbol

A sell-off on Tuesday didn’t fit into any neat investment pattern: The Standard & Poor’s 500 Index of U.S. stocks rose to a record, in a move widely attributed to the Federal Reserve’s trillion-dollar money injections, which theoretically could produce inflation. Bitcoin is seen by many investors as an inflation hedge, but gold prices, a traditional inflation hedge, rose. And the dollar fell, which also should theoretically push up bitcoin prices, since the cryptocurrency is denominated in dollars.   

Market Moves

This year’s rapid expansion in decentralized finance, or DeFi, has been so remarkable that analysts with the Norwegian digital-asset analysis firm Arcane Research are now calling the phenomenon “exuberant.” 

It’s been a “summer of crazy returns,” Arcane wrote Tuesday in a report. There are plenty of instances, most notably the recent mania in fresh-off-the-run “yield farming” tokens like Compound’s COMP and the now-kaput YAM. CoinDesk’s Paddy Baker reported early Wednesday news of another DeFi protocol, Spaghetti Money, which has no public figurehead or audited code, and it  just attracted $200 million.  

What investors are now trying to come to grips with is how much of this is real, promising innovation and how much is just crypto traders playing games with experimental DeFi building blocks; the projects are sometimes even referred to as “Money Legos.”

Related: $200M Staked in YAM-Inspired DeFi Protocol in Under 12 Hours

Entrepreneurs say they’re racing to build a better version of banks, trading firms and insurance companies, using blockchain technology and decentralized networks in concert to cut out rent-seeking middlemen; projects are supposedly controlled by “autonomous” governance systems. It’s all part of the industry spirit, which often seems like it’s live, but is still in beta and using real money.

And the sums are getting larger, fast. An index of 11 DeFi tokens created by the cryptocurrency exchange FTX has more than doubled in the past two months. Total value locked in DeFi systems, the most common way of measuring their success, has surged almost 10-fold this year to $6.8 billion, according to the website DeFi Pulse. 

As with any hype cycle, there’s a lot of room for confusion and loss. The data firm Messari wrote Tuesday in an email that some digital tokens referred to as “DeFi tokens” aren’t even really DeFi tokens. (See the Chainlink entry in Token Watch, below.)  

Eric Ervin, CEO of the cryptocurrency investment firm Blockforce Capital, wrote Tuesday that YAM’s rise and fall “should serve as a reminder that when it comes to investing, there is no free lunch.”  

And Mati Greenspan of Quantum Economics wrote Tuesday that “my preference, especially in the current crypto market, is to hold onto the more stable store-of-value coins.”

At a time when even traditional markets are now seen by many investors as irrationally exuberant, in the midst of a global pandemic and worldwide recession, it’s getting increasingly difficult to sort the productive from the crazy. 

-Bradley Keoun

Bitcoin Watch

“Bitcoin is beginning to show signs of lethargy,” the Singapore-based QCP Capital said early Wednesday in its Telegram channel. 

The leading cryptocurrency fell below $11,000, invalidating Monday’s ascending triangle breakout, which is considered a bullish continuation pattern.

The failed breakout, coupled with the bloated bullish positioning in the futures market suggests scope for an extended correction.

The immediate support is seen near $11,600, which, if breached, would open the door for a decline to $11,000. The broader bullish view remains intact with the U.S. inflation expectations rising to six-month highs. 

Read more: Bitcoin’s Bull Run is Slowing – Pullback Now Expected

– Omkar Godbole

Token Watch

Chainlink (LINK) rises to record despite apparently not being a DeFi token: The token for the decentralized finance (DeFi) oracle provider has continued its price rally, a 10-fold increase since a market sell-off in March. Searches for “chainlink” as well as the token’s trading volumes have soared. The project’s market capitalization has also surpassed bitcoin cash’s (BCH), now the fifth highest among all digital assets at $6.2 billion, according to CoinGecko. Mati Greenspan, the founder of analyst firm Quantitative Economics, told CoinDesk some investors may be getting in over their heads. And the data firm Messari wrote Tuesday that Chainlink isn’t technically a DeFi token because its price-feed service “in and of itself is not financial in nature.” 

YEarn.finance (YFI) skyrocketed on newly poured-in money: Prices for the governance token for the yEarn.finance have exploded since mid-July as investors flooded into the project. YEarn.finance, an aggregator of multiple lending protocols, optimizes for the highest yields for its users through several DeFi trading strategies. YFI holders can determine the overall direction of the protocol. CoinGecko shows YFI’s prices shot up to around $11,275 on Tuesday, an increase of more than 300-fold just since last month. The token’s limited supply – only 30,000 in total – is said to be a factor in the price increase, and YEarn founder Andre Cronje told CoinDesk that traders’ application of YFI in some other DeFi protocols may have contributed to the price surge.

Hive (HIVE) still trading at a premium to Steem: HIVE, the token resulting from a hard fork of Steem, changed hands at $0.269 on Tuesday versus the STEEM token’s $0.245, according to CoinGecko. The fight between the Tron Foundation and the Steem community was detailed Tuesday in Decrypt. The acquisition of Steemit Inc by Justin Sun’s Tron Foundation triggered widespread anger and fear that Sun might use the acquired Steem tokens to influence the community. The drama led to a hard fork and the creation of Hive.

-Muyao Shen

Analogs – on the economy and traditional finance

U.S. corporate-bond issuance hits annual record of $1.35T in just eight months (Bloomberg) 

Volatile currency markets might reflect diversification out of dollar (Bloomberg)

Brazilian, South African, Turkish currencies doing even worse than USD (WSJ)

U.S. Treasury Secretary: “The president wants us to do more. He wants us to provide money for kids and jobs.” (CNBC)

ECB assets to hit 8.2T euros by end of 2021, 70% of GDP (Bank of America)

Tweet of the Day

What’s Hot?

The OCC’s Crypto Custody Letter Was Years in the Making (CoinDesk)
A federal banking regulator’s decision to let banks provide crypto custody services may have seemed out of the blue, but the agency has been looking at cryptocurrencies for years.

Bequant, Now in Crowded Prime Brokerage Race, Adds Signature Bank Integration (CoinDesk)
Bequant, which built a crypto exchange to get into prime brokerage, has integrated Signature Bank’s Signet to its platform as part of a new partnership between the two.

Bitcoin Holding Sentiment Strongest in Nearly Two Years (CoinDesk)
Bitcoin exchange reserves have fallen to a 21-month low, a possible sign investors are feeling bullish about the shape of the market.

Why You Shouldn’t Donate Bitcoin Without Tax Planning (Forbes)
Careful consideration must be undertaken by an individual when it comes to planning for tax deductions via charity donations. Failing to do so means one could risk losing out to beneficial tax relief.

– Sebastian Sinclair

Related Stories

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• Binance-Owned WazirX Announces DeFi Project With Matic

Expobank, the former Russian subsidiary of global investment bank Barclays has followed Silvergate and issued out a loan that uses tokens, in this case, WAVES, as collateral.

The loan was made to an entrepreneur and tax consultant, Mikhail Uspensky, who bought WAVES in 2018 for a planned initial coin offering (ICO). When that fell through he tried staking them, before ultimately deciding to negotiate a token-collateralized loan with Expobank – who, it turns out, was receptive to experimenting with new loan issuances.

The tokens are now being held by a third-party notary. The loan amount, as well as the terms of the agreement, have not been disclosed.

Related: Russia, With Bitcoin Playing Bit Part, Tried to Hack 2016 US Election, Senate Report Finds

Barclays acquired Expobank for $745 million, months before the 2008 financial crisis. The new Russian subsidiary failed to gain much traction in its home market and the U.K. investment bank sold it on to notable local banker Igor Kim for an undisclosed sum in early 2019.

See also: Banks in US Can Now Offer Crypto Custody Services, Regulator Says

Expobank’s dabble in token collateralized loans comes after Silvergate said it had issued a total of $22.5 million worth of loans collateralized by bitcoin in July. The California-based bank only started offering them to clients in January.

Just a few weeks ago, Russia passed a law – that comes into force next January – that will regulate centrally-issued digital securities and also defined cryptocurrencies as a form of taxable property that can’t be used as a payment method.

Related: Russian Financial Crime Agency Plans AI Tool to Link Crypto Transfers to Users

A bank spokesperson told CoinDesk the test had been successful and they would watch regulatory trends to estimate future demand for these products.

See also: Coinbase to Offer Bitcoin-Backed Loans to US Customers

The move might help make Expobank more attractive to borrowers and help push it up Russia’s banking rankings: it’s loan portfolio currently languishes at 54 nationwide.

Related Stories

• Following OCC Letter, Some US Banks Appear Open to Providing Crypto Services
• Russia’s Sberbank Launches Blockchain on Hyperledger, Mulls Stablecoin in 2021

Bitcoin (BTC) could be set for an imminent retracement as the uptrend that had its origins in March’s “Black Thursday” crash now looks to be running out of steam. 

Singapore-based QCP Capital warned its Telegram subscribers Wednesday that bitcoin was showing signs of “lethargy” as it struggled to capture any new highs. Bitcoin fell below the key $12,000 milestone on Tuesday, pouring cold water on hopes earlier this week for a major bullish breakout.

Daily chart

Bitcoin jumped above $12,400 on Monday, confirming an ascending triangle breakout and signaling a continuation of the rally from the July lows of sub-$9,000. 

Related: Market Wrap: Bitcoin Slides to $11.8K; Uniswap at $7M in Monthly ETH Fees

But the breakout failed to invite stronger buying pressure and prices fell below $12,000 on Tuesday, invalidating the bullish setup. Chart analysts consider a failed breakout as a sign of bullish exhaustion – a slowing of price gains usually coupled with weakening buying pressure.

“Monday’s breakout of $12,000 was almost entirely short-squeeze driven, and the resultant failure just ahead of larger offers [sell orders] at $12,500 has solidified the price range of $12,000-$12,500 as a key resistance area for an extended period,” QCP Capital said.

Bitcoin may have a tough time establishing a foothold above $12,500 in the near term, as bullish positioning in the market is starting to look overstretched, QCP Capital said.  

Open interest in bitcoin futures on major exchanges rose to record highs of just under $6 billion on Monday, up 200% from the March low of $1.93 billion, according to data source Skew. 

Related: Dust Attacks Make a Mess in Bitcoin Wallets, but There Could Be a Fix

Such bloated bullish positioning often leads to deeper price pullbacks – more so, in cases where it’s accompanied by overbought readings on technical indicators. That seems to be the case as the weekly chart relative strength index has crossed above 70, a sign the rally may be overdone.

Chris Thomas, head of digital assets at Swissquote Bank, also thinks the rally in both BTC and DeFi-related coins has gone too far. “It’s natural that we are seeing profit-taking and weak buying at higher levels,” Thomas said in a LinkedIn chat.

Bitcoin is trading near $11,800 at press time, representing a 3.4% drop on a 24-hour basis, according to CoinDesk’s Bitcoin Price Index. The cryptocurrency is feeling the pull of gravity after failing to keep gains above $12,000 for the second time in three weeks and may suffer a bigger drop if support near $11,600 is breached.

“On the short-term charts, we see $11,600-$11,700 level as the new key short-term pivot to watch, failing which we will likely get our anticipated retest of $11,000,” QCP Capital noted. That said, the broader outlook will remain bullish, as long as prices are held above the former resistance-turned-support of $10,500 – originally the February high. 

A sell-off below that key support looks unlikely as inflation expectations in the U.S. are rising as rumors abound that the Federal Reserve may soon signal tolerance for higher inflation – meaning the central bank would keep interest rates low even if inflation rises above 2% target.

It’s probably no coincidence that bitcoin’s correlation with gold – the classic inflation hedge – has started to strengthen in recent weeks.

Related Stories

• First Mover: Bitcoin Passes $12K, Dollar Worries Grow, OMG Jumps, Portnoy’s Orchid #Pump
• Bitcoin Holding Sentiment Strongest in Nearly Two Years

Bitcoin (BTC) could be set for an imminent retracement as the uptrend that had its origins in the Black Thursday crash now looks to be running out of steam. 

Singapore-based QCP Capital warned its Telegram subscribers Wednesday that bitcoin was showing signs of “lethargy” as it struggled to capture any new highs. Bitcoin fell below the key $12,000 milestone on Tuesday – pouring cold water on hopes earlier this week for a major bullish breakout.

Daily chart

Bitcoin jumped above $12,400 on Monday, confirming an ascending triangle breakout and signaling a continuation of the rally from the July lows of sub-$9,000. 

Related: Market Wrap: Bitcoin Slides to $11.8K; Uniswap at $7M in Monthly ETH Fees

But the breakout failed to invite stronger buying pressure and prices fell below $12,000 on Tuesday, invalidating the bullish setup. Chart analysts consider a failed breakout as a sign of bullish exhaustion – a slowing of price gains usually coupled with weakening buying pressure.

“Monday’s breakout of $12,000 was almost entirely short-squeeze driven, and the resultant failure just ahead of larger offers [sell orders] at $12,500 has solidified the price range of $12,000-$12,500 as a key resistance area for an extended period,” QCP Capital said.

Bitcoin may have a tough time establishing a foothold above $12,500 in the near term, as bullish positioning in the market is starting to look overstretched, QCP Capital said.  

Open interest in bitcoin futures on major exchanges rose to record highs of just under $6 billion on Monday – up 200% from the March low of $1.93 billion, according to data source Skew. 

Related: Dust Attacks Make a Mess in Bitcoin Wallets, but There Could Be a Fix

Such bloated bullish positioning often leads to deeper price pullbacks – more so, in cases where it’s accompanied by overbought readings on technical indicators. That seems to be the case as the weekly chart relative strength index has crossed above 70 – a sign the rally may be overdone.

Chris Thomas, head of digital assets at Swissquote Bank, also thinks the rally in both BTC and DeFi-related coins has gone too far. “It’s natural that we are seeing profit-taking and weak buying at higher levels,” Thomas said in a LinkedIn chat.

Bitcoin is trading near $11,800 at press time, representing a 3.4% drop on a 24-hour basis, according to CoinDesk’s Bitcoin Price Index. The cryptocurrency is feeling the pull of gravity after failing to keep gains above $12,000 for the second time in three weeks and may suffer a bigger drop if support near $11,600 is breached.

“On the short-term charts, we see $11,600-$11,700 level as the new key short-term pivot to watch, failing which we will likely get our anticipated retest of $11,000,” QCP Capital noted. That said, the broader outlook will remain bullish, as long as prices are held above the former resistance-turned-support of $10,500 – originally the February high. 

A sell-off below that key support looks unlikely as inflation expectations in the U.S. are rising as rumors abound that the Federal Reserve may soon signal tolerance for higher inflation – meaning the central bank would keep interest rates low even if inflation rises above 2% target.

It’s probably no coincidence that bitcoin’s correlation with gold – the classic inflation hedge – has started to strengthen in recent weeks.

Related Stories

• First Mover: Bitcoin Passes $12K, Dollar Worries Grow, OMG Jumps, Portnoy’s Orchid #Pump
• Bitcoin Holding Sentiment Strongest in Nearly Two Years

The Financial Conduct Authority (FCA) has granted several licenses to digital securities exchange and custodian Archax – making it one of the world’s first authorized trading spaces for the asset-class.

• Archax said Wednesday it was now licensed as a multilateral trading facility (MTF) exchange, a broker, a cash and asset custodian.
• It is also the first crypto-asset firm to be registered with the FCA – a designation that will soon be mandatory for all companies working in the digital asset space from January next year.
• The London-based exchange, which is orientated towards institutions, is now authorized to host offerings, act as a trading venue as well as custody digital securities.
• Co-founder and CFO Matthew Pollard told CoinDesk Archax had become a “one-stop-shop” for the still-nascent digital securities space.
• A digital security is a catch-all term for traditional assets, such as equity or debt, that has been tokenized and put on the blockchain.
• The upshot from Wednesday’s announcement is that institutions will be able to trade digital securities on an authorized market for the very first time in the U.K.
• Archax CEO Graham Rodford said the exchange now had 35 issuances in the pipeline.
• Pollard said that Archax employed its own specific admissions criteria for the type of digital securities it would allow on its platform.

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

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• One Small Step for Bitcoin – SpaceChain Secured Transfer From International Space Station

The yield-farming craze continues: Investors have poured $200 million into a meme coin that’s barely 12 hours old, has no public figurehead or any audited code.

• Spaghetti Money offers staking pools in several DeFi tokens, including yEarn (YFI), Maker (MKR), and Compound (COMP).
• Launching 10 hours ago, investors have so far staked a total of $203 million in digital assets into its protocol. Total value locked (TVL) had surged by $3 million just as CoinDesk was going to press.
• Spaghetti doesn’t have a public team nor has its code been audited. Some of the code for staking rewards came from YAM – another yield farming protocol that went up in a fireball last week.
• There’s also a native PASTA token – that has no function since there isn’t a governance model – that will be publicly distributed through a staking pool sometime in the next seven days.
• Spaghetti is the latest in a series of “meme” coins that come up overnight with a catchy name and emoji to attract traders to stake millions of dollars into their pools.
• There’s now a prediction on decentralized survey site Prediqt betting Spaghetti will attract a total of $500 million TVL within the first 36 hours – something it’s currently on track to make.
• On Twitter, founder Robert Leshner of Compound, the first protocol to experience a yield farming craze, said that if Spaghetti’s TVL hits $500 million then “the industry needs to self-regulate and stop launching these meme farming games.”
• The protocol’s Twitter account caused confusion after it said Spaghetti was an ETC20 – rather than ERC20 – leading some to think it was launching on Ethereum Classic. The erroneous tweet hasn’t been corrected.

See also: DeFi-Yield-Hunting Token YFI Explodes to $11K From $32 in One Month

Related Stories

• First Mover: Money Legos Turn ‘Exuberant’ as Chainlink Stripped of ‘DeFi’
• UK Regulator Grants License to Digital Security Exchange Archax
• Riot Supercharges Mining Ops With 8,000 More Bitmain Rigs as Bitcoin Price Soars
• Blockchain Privacy Firm HOPR Releases Mixnet Hardware Node for Ethereum

The yield-farming craze continues: investors have poured $200 million into a meme coin that’s barely 12 hours old, has no public figurehead, or any audited code.

• Spaghetti Money offers staking pools in several DeFi tokens, including yEarn (YFI), Maker (MKR), and Compound (COMP).
• Having only launched ten hours ago, investors have so far staked a total of $203 million in digital assets into its protocol. Total value locked (TVL) had surged $3 million just as CoinDesk was going to press.
• Spaghetti doesn’t have a public team nor has its code been audited. Some of the code for staking rewards came from YAM – another yield farming protocol that went up in a fireball last week.
• There’s also a native PASTA token – that has no function since there isn’t a governance model – that will be publicly distributed through a staking pool sometime in the next seven days.
• Spaghetti is the latest in a series of “meme” coins that come up overnight with a catchy name and emoji to attract traders to stake millions of dollars into their pools.
• There’s now a prediction on decentralized survey site Prediqt betting Spaghetti will attract a total of $500 million TVL within the first 36 hours – something it’s currently on track to make.
• On Twitter, Compound founder Robert Leshner, the first protocol to experience a yield farming craze, said that if Spaghetti’s TVL hits $500 million then “the industry needs to self-regulate and stop launching these meme farming games.”
• The protocol’s Twitter account caused confusion after it said Spaghetti was an ETC20 – rather than ERC20 – leading some to think it was launching on Ethereum Classic. The erroneous tweet hasn’t been corrected.

See also: DeFi-Yield-Hunting Token YFI Explodes to $11K From $32 in One Month

Related Stories

• UK Regulator Grants License to Digital Security Exchange Archax
• Riot Supercharges Mining Ops With 8,000 More Bitmain Rigs as Bitcoin Price Soars
• Blockchain Privacy Firm HOPR Releases Mixnet Hardware Node for Ethereum
• Binance-Owned WazirX Announces DeFi Project With Matic

Riot Blockchain is buying 8,000 additional S19 Pro Antminers from BitmainTech PTE as the publicly traded company looks to compete in a bitcoin mining scene getting more difficult by the day.

• Miners are flocking to take advantage of bitcoin’s recent price surge. But they can only do so by deploying massive operations, as evidenced by all-time high network difficulty rates and recent rig acquisitions.
• Once fully online in early 2021, the rigs will vault Riot Blockchain’s hashrate – the computing power dedicated to mining bitcoin blocks – well above 1 exahash per second, according to a Monday press release.
• Riot Blockchain says it will have 15,040 deployed rigs posting 1.45 exashashes per second and consuming 47 megawatts of energy once it installs the Antminers.
• But that day won’t come until next April at the earliest. Bitman will begin delivering 2,000 S19 Pro Antminers per month starting in January 2021.
• Riot is spending $17.7 million on the rigs. It’s a bulk discount that Riot says comes in spite of bitcoin’s rocketing valuation.
• “With our current miner deployment schedule, we anticipate that based upon current factors, Riot would achieve positive cash flow in late 2020,” Chairman Remo Mancini said in the statement.

Related Stories

• Blockchain Privacy Firm HOPR Releases Mixnet Hardware Node for Ethereum
• One Small Step for Bitcoin – SpaceChain Secured Transfer From International Space Station
• Russia, With Bitcoin Playing Bit Part, Tried to Hack 2016 US Election, Senate Report Finds
• DeFi-Yield-Hunting Token YFI Explodes to $11K From $32 in One Month

Bitcoin’s prices were off from Monday’s high. Meanwhile, high fees on Ethereum helped decentralized exchange Uniswap rake in $7 million over the past month.

• Bitcoin (BTC) trading around $12,002 as of 20:00 UTC (4 p.m. ET). Slipping 2.8% over the previous 24 hours.
• Bitcoin’s 24-hour range: $11,825-$12,412
• BTC below its 10-day and 50-day moving averages, a bearish signal for market technicians.

Read More: Bitcoin Mining Pools See Hashrate Drop Amid Rainstorms in China

After hitting a 2020 high Monday, bitcoin dipped to as low as $11,825 on spot exchanges such as Coinbase on Tuesday. Seychelles-based BitMEX saw plenty of action during this price rise and fall, as both long and short traders were wiped out in automatic liquidations, the crypto equivalent of a margin call. During Monday’s sharp price rise, BitMEX liquidated short traders by as much as $10 million in one hour. During Tuesday’s decline, long traders were wiped out at a rate of $6.7 million in an hour. 

Related: Dust Attacks Make a Mess in Bitcoin Wallets, but There Could Be a Fix

Many traders, including Andrew Tu of quant trading firm Efficient Frontier, see $12,000 as “resistance” or a price level that is tough to overcome but when it is, bitcoin can break to higher territory. 

“Bitcoin finally broke its $12,000 resistance Monday,” said Tu. “Now it’s on to $13,000 and $14,000 as resistance, assuming that we can hold above $12,000.” 

Bitcoin’s price was just under $12,000 as of press time after the selling pressure earlier. 

Michael Rabkin of Chicago-based trading firm DV Chain told CoinDesk both retail and institutional interests are fueling fresh bitcoin highs, and the asset is headed higher. “Bitcoin’s popularity is growing in the mainstream media and with traditional investment firms as the U.S. continues its stimulus,” he told CoinDesk.“Even though this can’t last forever there is no end in sight, so people are looking for alternatives” to the U.S. dollar, Rabkin added.

Related: First Mover: Bitcoin Passes $12K, Dollar Worries Grow, OMG Jumps, Portnoy’s Orchid #Pump

Indeed, the U.S. Dollar Index, a measure of the greenback’s strength relative to a basket of other currencies, is at an over-two-year low Tuesday as the coronavirus-inflicted global economy continues to cause problems for the American economy.

Every time bitcoin’s price moves higher over the remaining months of an uncertain 2020, there will be renewed investor interest in crypto, added Efficient Frontier’s Tu. “It’s all part of this current bull cycle we’re in,” Tu said. “It’s a positive feedback cycle in which double-digit rises cause more retail and professional investors to jump in, which begets further rises.”

Read More: Bitcoin Holding Sentiment Strongest in Nearly Two Years

Uniswap first in ETH fees

Ether (ETH), the second-largest cryptocurrency by market capitalization, was down Tuesday at around $424 and slipping 2.7% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: DeFi-Yield-Hunting Token YFI Explodes to $11K From $32 in One Month

The decentralized exchange, or DEX, Uniswap V2 has crossed $7 million in fees collected over the past month. It is currently number one on the Ethereum network, according to fee tracker ETH Gas Station. The DEX also dominates the market for trading volume, at $233 million in the past 24 hours and over 60% of market share.

George Clayton, managing partner of alternative asset firm Cryptanalysis Capital, says Ethereum’s growth is “crazy.” He noted the second company on Ethereum’s fee rankings, Tether, rakes in $6.3 million in fees per month and is deployed on other blockchains. “Tether is the only major project to spread out on other blockchains,” Clayton said. “I’m a bit surprised others haven’t followed yet given Ethereum’s gas problems. Something has to give.” 

Other markets

Digital assets on the CoinDesk 20 are mostly in the red Tuesday. Notable winners as of 20:00 UTC (4:00 p.m. ET): 

• basic attention token (BAT) + 13.9%
• nem (XEM) + 4.5%

Read More: Elliptic Adds Monitoring Support for Binance Chain and BNB

Notable losers as of 20:00 UTC (4:00 p.m. ET): 

• chainlink (LINK) – 13.6%
• bitcoin gold (BTG) – 7.6%
• tezos (XTZ) – 5.4%

Read More: Chainlink Up Nearly 1,000% Since ‘Black Thursday’ Crash

Equities:

• Asia’s Nikkei 225 closed in the red 0.20% as tensions between the U.S. and China were cause for investor concern in Tokyo.
• In Europe, the FTSE 100 ended the day slipping 0.50% as concerns about rising coronavirus cases spooked investors.
• The United States’ S&P 500 gained 0.30% to an all-time high of 3,386.15 as the index regained all of its losses from March's crash.

Read More: Dust Attacks Make a Mess in Bitcoin Wallets, but There Could Be a Fix

Commodities:

• Oil is down 0.37%. Price per barrel of West Texas Intermediate crude: $42.57.
• Gold was in the green 1% and at $2,001 as of press time.

Read More: The OCC’s Crypto Custody Letter Was Years in the Making

Treasurys:

• U.S. Treasury bonds all slipped Tuesday. Yields, which move in the opposite direction as price, were down most on the two-year, in the red 5.3%.

Read More: Bitcoin Mining Pools See Hashrate Drop Amid Rainstorms in China

Related Stories

• Bitcoin Holding Sentiment Strongest in Nearly Two Years
• Chainlink Up Nearly 1,000% Since ‘Black Thursday’ Crash

Decentralized privacy startup HOPR has released its first “customized HOPR Hardware Node,” which the startup says removes any reliance on cloud servers predominantly controlled by Amazon and Alibaba. 

• HOPR uses a token-incentivized mixnet solution, essentially doing the same for blockchain as Tor (the onion router) or a virtual private network (VPN) do on the internet. The mixnet node combines running an Ethereum node with next-level data privacy.
• It’s the first hardware product released by a data privacy company in the blockchain space, the company said in a statement. (Other types of crypto firms have pursued similar hardware offerings, including Filecoin and Helium.)
• HOPR is not the first company to use blockchain tokens to incentivize participants to enhance the privacy of a network, however. Competition in this area is currently ramping up with the likes of Orchid protocol, also based on Ethereum, seeing its token recently surge in value.
• HOPR’s plug-and-play, blockchain-ready node is being sold at $400 with an 8GB RAM and 1TB of SSD storage. The company is only making 100 HOPR Hardware Nodes available for the initial release.
• Last month HOPR announced a $1 million funding round led by Binance Labs.

Read more: Binance Labs Leads $1M Seed Round in Crypto Tor Alternative HOPR

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• DeFi-Yield-Hunting Token YFI Explodes to $11K From $32 in One Month

The Mumbai-based crypto exchange WazirX, one of the biggest in India, recently announced it is developing a decentralized finance (DeFi) product in partnership with Matic Network, a blockchain scalability platform. 

“We are launching an automated market maker (AMM) protocol and partnering with Matic Network to launch the protocol”, the exchange, a subsidiary of Binance, said in a blog post on Saturday.

Automated market makers are algorithmic agents that make it easier to list and exchange cryptocurrencies without the help of an order book.

Related: DeFi-Yield-Hunting Token YFI Explodes to $11K From $32 in One Month

AMM-based decentralized exchanges (DEXs) like Uniswap, which enable running of openly accessible, on-chain liquidity pools for different tokens, have witnessed staggering growth in trading volumes over the past few months.

“The DeFi movement has picked up globally and WazirX plans to make it easy for billions of Indians to participate in the DeFi ecosystem,” WazirX said.

Lowering the gas

The exchange, however, has opted for Matic instead of Ethereum’s network, which is currently dominating the DeFi space. “High gas costs [transaction fees] and scalability on Ethereum are definitely concerns that made us choose Matic, which offers high speed,” Nischal Shetty, CEO of WazirX, told CoinDesk in a Telegram chat.

Indeed, costs of executing transactions on Ethereum’s blockchain are up over 3,000% on a year-to-date basis. More recently, the average transaction fee rose to five-year highs above $6.

Related: Binance Credited With Helping Take Down Ukraine Crypto Laundering Group

Also read: Decentralized Finance Frenzy Drives Ethereum Transaction Fees to All-Time Highs

Fees are relatively low on Matic’s network. “Their Reddit proof-of-concept showed 3 million transactions at a cost of [a] mere $4 and the side chains have shown throughput of 7,200 transactions per second, which is very promising for the scale WazirX wants to achieve with its AMM-based DEX,” the exchange said in its blog post.

WazIrX, which was acquired by the global cryptocurrency exchange and blockchain ecosystem Binance last year, plans to launch the testnet of its AMM in September.

“The DeFi project is WazirX’s initiative,” said Shetty, adding that “we are glad to have support from the Binance team. It’s a huge advantage to be a part of the ecosystem.”

Also read: India May Be Starting Its Biggest Bitcoin Bull Run Yet

Trading volumes on cryptocurrency exchanges serving Indian citizens have soared since the Supreme Court lifted the Reserve Bank of India’s ban on crypto transactions in March. The weekly bitcoin peer-to-peer transaction volumes have doubled to over 300 million rupees ($4 million). 

Related Stories

• Elliptic Adds Monitoring Support for Binance Chain and BNB
• Market Wrap: Bitcoin Cracks $12.4K; DeFi Crosses $6B Locked

SpaceChain, the U.K. crypto firm with extraterrestrial aspirations, secured a bitcoin transfer with its multi-signature transaction hardware orbiting Earth every 90 minutes.

• SpaceChain’s International Space Station-hosted (ISS) hardware authorized a 0.0099 BTC (about $92 at the time) transfer initiated by Chief Technology Officer Jeff Garzik on June 26, the decentralization company disclosed Tuesday.
• Developed by GomSpace and installed on the ISS on June 25, that hardware holds a private key needed to verify blockchain transactions via the “multi-signature” technique.
• Data can only reach the ISS via the craft’s encrypted ground station links. SpaceChain says this adds security and resilience to transaction authorizations.
• Representatives did not immediately answer CoinDesk’s questions as to why a transaction initiated on June 26 was only made public nearly two months later.
• Although the ISS hardware cannot communicate with other crafts, SpaceChain hopes to build and launch robust decentralized blockchain infrastructure that can do so.

Read more: A Bitcoin Wallet Is Orbiting the Earth at 5 Miles Per Second

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• Russia, With Bitcoin Playing Bit Part, Tried to Hack 2016 US Election, Senate Report Finds
• DeFi-Yield-Hunting Token YFI Explodes to $11K From $32 in One Month
• Binance Credited With Helping Take Down Ukraine Crypto Laundering Group
• Crypto Exchange LGO Integrates With Fireblocks to Speed Up Trading Times

Ferrari sells cars so it can go racing; Bequant built a crypto exchange to get into prime brokerage.

That’s the analogy offered by the firm’s head of institutional services, Alex Mascioli, when asked about a new banking relationship with Signature’s blockchain-based payments platform, Signet, first revealed to CoinDesk this week.

Prime brokerage, Mascioli said, was always Bequant’s race to win.

Related: Coinbase to Offer Bitcoin-Backed Loans to US Customers

Prime brokers are facilitators for financing and trading for deep-pocketed institutional investors. While the digital asset space doesn’t have a lot of prime broker options currently, several crypto firms including Coinbase, BitGo and Genesis Trading have announced in recent months their intent to build prime brokerage wings.

Bequant was building a prime brokerage service for crypto before it was cool, said CEO George Zarya.

Read more: Behind ‘Prime Broker’ Buzzword Lies a Complex Strategy Game for Crypto Firms

“When we started building the prime brokerage product almost two years ago, nobody was doing it,” Zarya said. “There were a couple of players that called themselves prime brokers, but what they were doing was aggregating liquidity.”

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To compete in a newly crowded market, Bequant’s connection to Signature Bank’s Signet will allow the firm to more easily settle fiat for more clients. Bequant is also connected to the Silvergate Exchange Network, Globitrex Exchange and U.K.-based electronic money institution BCB Group, Zarya said. 

“It’s an important transition between the legacy financial markets and the new digital markets,” he added. 

The variety of banking and payments relationships allows Bequant to serve clients that use a variety of onramps to the U.S. dollar, because no U.S. bank has emerged as a clear leader in the digital asset space, Zarya said. 

The firm now boasts a list of services that includes capital introduction, fund administration, securities lending, multi-exchange direct market access, custody, collateral management, leveraged trade execution, over-the-counter block trading, risk management and smart order routing.

According to Zarya, clients care most about easy access to spot and derivatives markets, lending, managing collateral across exchanges, having analytics on top of their portfolios and APIs that can let them connect to multiple exchanges at once. The products that cost the most for the firm to build were custody and collateral management, he added. 

Investor access

Blockforce Capital CEO Eric Ervin said capital introduction is where prime brokers in traditional markets can stand out. (Ervin uses Tagomi as Blockforce’s prime broker.) In the traditional world, investment banks like Goldman Sachs and Morgan Stanley connect clients to hedge funds, pension funds and endowments.

Bequant is connected to 11 sources of liquidity currently including HitBTC, Binance, OKex, Huobi, Bittrex, Bitifnex, Deribit and Bequant’s own exchange and plans to expand it’s exchange connections to a dozen by the end of the year. The other four sources of liquidity are unnamed OTC desks.

“These exchanges are venues that our team has one-on-one relationships with,” Mascioli said. “This isn’t as simple as dropping in APIs.”

Read more: Bequant Launches Crypto Prime Brokerage to Compete for Institutional Money

When Bequant launched its exchange two years ago, Zarya said he recognized there was a need for an institutional-grade exchange offering high-frequency trading services. Most exchanges are still built to serve primarily retail customers, he added, meaning their infrastructure struggles to keep up with high trading volumes.

“One of the issues that we’ve had with some of our exchanges is the rate per second allocation,” Zarya said. “If you trade a high-frequency trading strategy, you may want to opt into a higher rate-per-second allocation.” Bequant’s internal trading averages around 400 microseconds per trade, which is close to the London Stock Exchange’s 150 microseconds.

The firm is currently planning to raise a round of venture capital to beef up operating capital on its lending side. 

“We’ve managed to build a great product by bootstrapping,” Zarya said. “Our exchange business turned profitable within the first 12 months. … It took us about $2.5 million to get it up and running.” Zarya expects the prime brokerage side of the business to be profitable within the next six months.

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