Crypto Currencies

Last year certainly qualifies as one of the most volatile in stock market history. Investors navigated their way through the widely followed S&P 500 losing over a third of its value in about a month. They also enjoyed a bounce-back rally for the ages, with the S&P 500 hitting new highs less than five months after finding a bottom on March 23.If there's one figure that stands out above all else, it's that 10% of the roughly 3,700 stocks with a market cap of at least $300 million ended 2020 higher by at least 100%.

That's a head-scratching number considering the magnitude of the recession caused by the coronavirus disease 2019 (COVID-19) pandemic.There's no question that select equities and assets got ahead of themselves over the trailing nine months since the stock market bottomed. However, one investment looks to be the most dangerous of all.

That investment, which I strongly believe should be avoided at all costs in 2021, is cryptocurrency bitcoin.

This investment is nothing but trouble

The largest digital token in the world by market cap hit an early morning high on Jan. 3 of $34,000. For some context, bitcoin has doubled since Nov. 27, is up 200% since mid-October, and has risen 363% over the trailing-12-month period.

Bitcoin's implied market cap of $628.2 billion now accounts for nearly 73% of the $866.3 billion in value tied up in more than 8,100 digital tokens.Why is bitcoin rallying? Search any number of social media platforms and you'll get no shortage of responses from enthusiasts.

Bitcoin bulls often suggest that its competitive edge, community consensus, and game-changing potential to transform payment processing made this rally easy to predict.

Dollar-cost averaging:

A crucial investing strategy for a potentially rocky yearInvesting apps make it easy for beginners:Here's how I started.

As for me, I don't believe bitcoin is unique in any way, save for being one of the preferred investment mediums on cryptocurrency exchanges. In other words, if investors want to buy a less-popular token, they'll usually need to exchange their fiat currency to bitcoin first before making their purchase. That, my friends, is the only true utility that bitcoin serves.

The concept of scarcity has been pulled out of thin air

Bitcoin bulls often point to its so-called hard cap of 21 million tokens as proof of its scarcity. Simple economics tells us that if demand for a good exceeds supply, and supply is limited, the price of that good should rise. Case closed, right?Not exactly.



You see, we're not talking about a physical good being in limited supply. Bitcoin's token cap is nothing more than an arbitrary figure plucked from thin air. Physical gold is considered scarce because we can't make any more gold than what can be found and mined on planet Earth.

That's not the case with bitcoin. Community consensus could lead to an increase in the token limit. The chance of this happening might be small, but it's not 0%.Bitcoin offers the perception of scarcity, and this falsity has helped drive its valuation higher.

There's minimal utility

You'll also hear about bitcoin being the future of global payments. Again, this isn't entirely accurate or possible.While the number of businesses accepting bitcoin as payment is climbing, the actual percentage of businesses willing to accept bitcoin is tiny.

According to financial services company Fundera, only around 2,300 U.S. businesses accept bitcoin as payment. Yet, the U.S. Census Bureau finds there are 32.5 million businesses in the U.S., including sole proprietorships. Even if we just counted businesses that have an employee, that's 2,300 out of 7.7 million companies accepting bitcoin.



Plus, approximately 40% of bitcoin tokens are held by investors and kept out of circulation. That leaves about 11.2 million bitcoin for transactions. The value of these tokens is close to $380 billion. In 2019, global gross domestic product totaled $142 trillion.Bitcoin has no path to game-changing utility.

It's not a store of value

No matter how much bitcoin enthusiasts want to equate bitcoin to gold, it's never going to be a store of value.

Store of value assets usually have identifiable relationships to government-backed fiat currencies, and they aren't all that volatile. For instance, gold has an identifiable inverse relationship with the U.S. dollar, and it's buoyed by physical scarcity.

Bitcoin doesn't have any identifiable relationships to government-backed fiat currencies. Enthusiasts would like you to believe that an inflated U.S. money supply is good news for bitcoin, but that would only be true if it had some sort of like-for-like federal government backing and had true scarcity – neither of which is true.

Bitcoin has also lost 80% of its value multiple times over the past decade, including a handful of instances when it was halved in roughly a 24-hour period. That's not how store-of-value assets behave.

You have no ownership in the underlying blockchain

Bitcoin bulls are also quick to point out how bitcoin's blockchain is revolutionizing the payment and settlement process.

While it's true that blockchain offers plenty of intrigue, buying bitcoin doesn't give token holders any ownership in the underlying architecture that might actually be worth something.Money tips for the new year:

Here are 21 ways to reduce debt, build an emergency fund in 2021

What's more, it's foolish (small f) to assume that bitcoin's blockchain is superior. Bitcoin may have first-mover advantage, but there are hundreds of ongoing blockchain projects that offer possibilities beyond the financial space.

There's virtually no barrier to entry

It's also important to note that the cryptocurrency space has virtually no barrier to entry. All it takes is some time and money to develop blockchain with or without a tethered digital currency. There are exactly zero guarantees that blockchain will be adopted on a broad scale, or that bitcoin will be in any way necessary.

There are a number of blockchain projects in development that may work with fiat currencies, or without a digital token at all.

It's not just bitcoin that's dangerous

Keep in mind that owning bitcoin isn't the only way you can gain exposure to this dangerous investment. The Grayscale Bitcoin Trust (OTC: GBTC) owns 607,038 bitcoin and essentially acts as a basket fund that investors can buy. Of course, those investors will pay a ridiculous 2% fee annually for the right to buy the Grayscale Bitcoin Trust, and may have to buy in at a premium, as in years past. 

Likewise, business intelligence company MicroStrategy (NASDAQ: MSTR) sunk more than $1.1 billion in balance sheet cash into bitcoin. This cryptocurrency stock issued debt just to buy extra bitcoin. Meanwhile, MicroStrategy's sales through the first months of 2020 were down 1%, while its operating losses widened.Put plainly, bitcoin is dangerous.

It's driven by short-term emotions, technical analysis, and misinformation about its scarcity, utility, and long-term potential. It's the one investment you should strongly avoid in 2021.


Americans are hoarding toilet paper again because of COVID-19 fears, and it could cost themRochester, New York company AeroSafe playing pivotal role in 'last mile ' of COVID vaccine delivery2020 discontinued cars: These vehicles are going away4 things to do when you think you can't make any more budget cutsThe Daily Money: Subscribe to our newsletter




Sean Williams has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool recommends MicroStrategy and has no position in any cryptocurrencies mentioned.

The Motley Fool has a disclosure policy.The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

Offer from the Motley Fool:10 stocks we like better than Grayscale Bitcoin TrustWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen.

After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Grayscale Bitcoin Trust wasn't one of them! That's right – they think these 10 stocks are even better buys.

See the 10 stocks

• Bitcoin (BTC) trading around $31,444 as of 21:00 UTC (4 p.m. ET). Slipping 5.7% over the previous 24 hours.
• Bitcoin’s 24-hour range: $28,154-$33,562 (CoinDesk 20)
• BTC slightly below its 10-hour and well below the 50-hour moving average on the hourly chart, a bearish-to-sideways signal for market technicians.

Bitcoin trading on Bitstamp since Jan. 1.Source: TradingView


The price of bitcoin fell Monday, met by a spate of selling pressure. Around 10:00 UTC (5 a.m. ET), spot exchanges like Coinbase saw a larger-than-normal number of traders hitting sell, with 6,000 BTC in volume on the exchange during that hour. Prices dropped as low as $28,154, according to CoinDesk 20 data. 

Read More: Bitcoin Suddenly Drops 13% as Altcoins Continue to Rise“A lot of folks are now taking a profit after rapid growth in price,” said Constatin Kogan, managing partner at crypto investment firm Wave Financial.

Indeed, bitcoin crossed $34,000 and hit an all-time record high of $34,366 on Jan. 2, according to CoinDesk 20 data. Analysts are seeing many investors realize some gains after such a rapid rise.




Historical bitcoin price the past week.Source: CoinDesk 20

“Over the weekend, as bitcoin prices hit fresh all-time highs, markets touched new levels of resistance,” said Jason Lau, chief operating officer of San Francisco-based exchange OKCoin. “Profit-taking occurred around these levels, resulting in some sideways trading and causing many to be over-leveraged long on futures.”

During the 10:00 UTC (5 a.m. ET) period of higher-than-normal selling Monday, derivatives exchange BitMEX saw $10 million in liquidations, the crypto comparable to a margin call on over-leveraged bullish bets.





Bitcoin liquidations on derivatives venue BitMEX the past 24 hours.Source: Skew

In total, $135 million in sell liquidations occurred on BitMEX over the past day, far outweighing the $34 million in buy liquidations from traders going short. This indicates some exhaustion of what has been a hyper-bullish market until Monday. 

Subscribe to First Mover, our daily newsletter about markets.

SUBSCRIBE

By signing up, you will receive emails about CoinDesk products and you agree to our terms & conditions and privacy policy.

Nonetheless, Lau still expects buying pressure to keep bitcoin’s price up. ”These dips are being bought up pretty quickly, reinforcing the narrative that there are underlying bids by institutions keen to access bitcoin,” he told CoinDesk. 

Some profit-taking is likely going from bitcoin into ether. Since Jan. 3, ether has exploded and is now up 38.5% in 2021 while the price per 1 BTC has appreciated 7.5% thus far in 2021.



Bitcoin (gold) versus ether (blue) price performance in 2021 so far.Source: TradingView

“Traders rotated assets from BTC into alts to gain higher returns,” said Lau, who refers to ether as one of the “alts,” or alternative cryptocurrencies. “This is evident as [ether] gained over bitcoin in the last 24 hours.”

Wave Financial’s Kogan sees this rotation from bitcoin to other crypto assets as an impermanent condition. “Another interesting factor now is the alt season, so the demand slowly switches to other crypto assets. But in my opinion, this is temporary.”

Ether futures open interest crests $2.6 billion

The second-largest cryptocurrency by market capitalization, ether (ETH), was up Monday trading around $1,034 and climbing 10.4% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

Read More: Ether Price Passes $1,150 to Hit Highest Since January 2018

The ether futures market set a new record high Sunday, at $2.6 billion in open interest, or OI. Leading the way in OI is Binance with $632 million, followed by OKEx with $421 million and Huobi in third with $382 million.



Open interest on various venues for ether futures the past six months.Source: Skew

Futures interest in ether is rising because savvy investors want to start hedging lofty ether price levels, according John Willock, chief executive officer of crypto asset manager Tritum.

“There is a strong natural inclination for some long-term ETH hodlers to finally sell at the numerically significant $1,000 threshold, where we have seen a lot of limit orders sitting on exchange books waiting to get filled,” Willock told CoinDesk. 

He also said institutional interest in ether is growing because CME is expected to launch ether futures next month and investors are currently looking for any way to access the ether futures market.

“Institutions are able to put short pressure on these markets as many people will expect a near-term price correction after this monumental and fast run-up in blue-chip crypto instruments,” Willock added. 

Just before we pop off for the holidays we thought we would bring you some of the highlights of the SEC’s filing against Ripple Labs. Because its 71 pages really were hugely insightful reading. Emphasis ours throughout.


 Let’s start with the assertion that the defendants were aware of their venture potentially falling under federal securities law as far back as 2013:


 Ripple engaged in this illegal securities offering from 2013 to the present, even though Ripple received legal advice as early as 2012 that under certain circumstances XRP could be considered an “investment contract” and therefore a security under the federal securities laws.

From a financial perspective, the strategy worked.

Over a years-long unregistered offering of securities (the “Offering”), Ripple was able to raise at least $1.38 billion by selling XRP without providing the type of financial and managerial information typically provided in registration statements and subsequent periodic and current filings.

Ripple used this money to fund its operations without disclosing how it was doing so, or the full extent of its payments to others to assist in its efforts to develop a “use” for XRP and maintain XRP secondary trading markets.

This, meanwhile, is the essence of how the operation worked:


 While Ripple touted the potential future use of XRP by certain specialized institutions, a potential use it would deploy investor funds to try to create, Ripple sold XRP widely into the market, specifically to individuals who had no “use” for XRP as Ripple has described such potential “uses” and for the most part when no such uses even existed

Moving on to how Ripple funded its operations with sales of XRP, its native digital currency:


 Ripple also lacked the funds to pay for these endeavors and for its general corporate business expenses, which for 2013 and 2014 already exceeded $25 million, without selling XRP.

Ripple’s objectives and its own financial reality thus compelled it to actively seek to offer and sell XRP as widely as possible, while controlling supply and demand in the resale market to manage and control liquidity for an imagined, future “use” case.


 In 2017, Defendants also began accelerating Ripple’s sales of XRP because, while Ripple’s expenses continued to increase (reaching nearly $275 million for 2018), its revenue outside of XRP sales did not.


 And some more on how its entire business model was basically focused on the selling of XRP:

For example, starting in 2016, Ripple began selling two software suites, xCurrent and xVia, from which it has earned approximately $23 million through 2019, though neither uses XRP or blockchain technology. Ripple raised about $97 million in sales of equity securities through 2018 and an additional $200 million in 2019.

In other words, the overwhelming majority of Ripple’s revenue came from its sales of XRP, and Ripple relied on those sales to fund its operations.

From 2014 through the end of 2019, to fund its operations, Ripple sold at least 3.9 billion XRP through Market Sales for approximately $763 million USD.


 From 2013 through the end of the third quarter of 2020, Ripple sold at least 4.9 billion XRP through Institutional Sales for approximately $624 million USD, also to fund Ripple’s operations, for a total of at least $1.38 billion USD in Market and Institutional Sales alone.

How the holders of XRP benefited from the controlled distribution of the digital tokens in price terms:


 The market price for XRP—and Ripple’s sales prices in the Offering—ranged from a low price of approximately $0.002 per XRP in 2014 to a high price of $3.84 per XRP in early 2018, an increase of nearly 137,000%. XRP traded at approximately $0.58 USD per XRP as of last week.


 From 2015 through at least March 2020, while Larsen was an affiliate of Ripple as its CEO and later chairman of the Board, Larsen and his wife sold over 1.7 billion XRP to public investors in the market. Larsen and his wife netted at least $450 million USD from those sales.


 From April 2017 through December 2019, while an affiliate of Ripple as CEO, Garlinghouse sold over 321 million XRP he had received from Ripple to public investors in the market, generating approximately $150 million USD from those sales.

And here’s a nice summary of all the sales:


 The unregistered third-party middlemen that Ripple organised and paid to help them manage the sales:

The entities Defendants enlisted to help carry out the Market Sales—the specialized traders or the trading platforms—were typically not registered with the SEC in any capacity.

Ripple conducted the Market Sales by paying at least four entities commissions, paid in XRP, for executing Ripple’s XRP sales to the public on digital asset trading platforms.


 How the middlemen were directed to control the price:

At Ripple’s direction, the intermediaries such as the Market Maker ensured that Market Sales were programmatically set not to exceed a certain percentage of XRP’s overall daily trading volume, and Ripple referred to the Market Sales as “programmatic sales.

”

How they incentivised institutional holders with pre-arranged discounted terms relative to public market prices (the public market that the securities were loaded off into):

Ripple made many of the XRP Institutional Sales at a discount from XRP market prices.

At least seven of the institutional investors—including some described below—bought XRP at discounts between 4% and 30% to the market price

More about how Ripple paid money-transmitting businesses with XRP to use its product:


 As described below, in late 2018 Ripple began to market a product (“On-Demand Liquidity” or “ODL,” also called “xRapid”) for money transmitting businesses to buy XRP in one jurisdiction, transfer it to a separate destination, and sell XRP for the local fiat currency, to effect cross-border payments.

 To encourage adoption of ODL, Ripple paid XRP to both the money transmitting businesses and certain market makers that supported the product for their efforts.

From approximately December 2018 through July 2020, Ripple issued at least 324 million XRP as fees, rebates, and incentives to entities associated with ODL, without restricting the ability of these entities to resell the XRP received as incentives into public markets.

This XRP was valued at approximately $67 million at the time of Ripple’s payments.

These entities typically have resold all the XRP they have received from Ripple to investors in the public markets, typically on the same day that they received the XRP from Ripple.

How Ripple managed comms to maximise XRP value:


 On November 1, 2017, Ripple Agent-3 informed Ripple Agent-2 that Ripple was looking to “accelerate/prioritize XRP-beneficial announcements,” including potentially the formation of the XRP Fund.

On November 11, 2017, a Ripple marketing executive asked Garlinghouse and Ripple Agent-3 in an email if they could use an upcoming investment conference in Manhattan to “push” the XRP Fund or the RippleWorks CEO “to close so we can announce.

” The next day, Ripple Agent-3 informed Garlinghouse that Ripple was “following up with [the RippleWorks CEO] with some provisions [for the XRP Fund] to prevent harmful XRP behaviour.

”

How Ripple emulated a central bank in how it regulated those it distributed its tokens to:


 For example, a November 1, 2018, two-year “Services and Marketing Agreement” with one entity promised “certain development services to promote technologies of interest to Ripple.

” The agreement provided that the entity would receive a bi-monthly “development service fee” of 5 million XRP and could identify additional parties that could receive XRP as incentives— provided that these additional parties agreed to abide by Ripple-mandated parameters for their XRP trading volumes.

 By August 2020, Ripple had paid the entity at least 364 million XRP, of which the entity had distributed 178 million to other parties, typically approved by Ripple.


 How the fee it paid holders of XRP emulated a type of interest rate:

In 2017 and 2018, Ripple also entered into agreements with at least ten digital asset trading platforms—none of which were registered with the SEC in any capacity, and at least two of which have principal places of business in the United States—providing for listing and trading incentives with respect to XRP.

Ripple paid these platforms a fee, typically in XRP, to permit the buying and selling of XRP on their systems and sometimes incentives for achieving volume metrics.

How Ripple incentivised trading platforms to list its tokens:


 Ripple tried repeatedly and unsuccessfully to persuade that digital asset trading firm to “list XRP on [its] exchange” by offering to “cover implementation costs, paying rebates, [and] brokering intros to large XRP holders for custody

.” Undaunted by these initial failures, Ripple Agent-3 emailed the two owners of the firm directly in July 2017, copying Garlinghouse, and asked: “Does a $1M cash payment move the needle for a Q3 listing?

”

How Ripple emulated a central bank in how it managed price and volatility in the price of XRP:

These efforts also included timing the prices and amounts of XRP sales to achieve what Ripple viewed as desirable trading volume or price levels and fluctuations with respect to XRP.

Ripple sought to maximize the amount it could earn from the XRP Market Sales while minimizing volatility and any downward pressure on XRP’s market price caused by Ripple’s constant injections of new XRP into the market to raise operating funds.


 Ripple internally described these strategies as aimed at maximizing the amount of money Ripple could raise in the Offering or at achieving “more speculative [XRP] volume.

” At times, Ripple publicly described its efforts as meant to protect the public’s investments in XRP.

Then there’s this extraordinary detail about how Ripple execs used buybacks to firm up the price of XRP:


 On April 11, 2016, Ripple also directed the Market Maker to buy XRP in the open market with the goal of “[t]arget[ing] $0.008 incrementally over the course of 2 days” while “[c]ap[ping] activity at 5% of daily trading volume[,]” among other things.

 A Ripple vice president of finance (the “VP of Finance”) then asked Garlinghouse and Ripple Agent-3 “if [they] discussed whether we should turn off the buying now with this news and the higher volume?” Ripple Agent-3 responded:

“The thesis . . . is to show a period of consistent buying from an account that is known to be a consistent seller. The intended impact of the buying is not to move the price but rather to provide confidence in the market, which in turn will move the price.”

Following this exchange, Ripple did not “turn off the buying” of XRP.


 The following month, September 2016, Ripple directed the Market Maker to place XRP buy and sell orders around the time of announcements Ripple made that month referring to Ripple’s achievements, though neither announcement concerned XRP.


 How Ripple execs analysed the market impact of XRP purchases:

On September 20, 2016, the VP of Finance emailed the Market Maker and said that, after consultation with Garlinghouse and Larsen, Ripple wanted to “better understand[ ] the impact of our purchases [of XRP] over the past week” and that Ripple’s “[c]urrent thinking [was] that we should use our full $300k [designated for XRP purchases] in the first 24 hours post announcement.

”

The next day, the Market Maker provided the VP of Finance and Ripple Agent-3 with data showing “the positive relationship between hourly price changes of XRP and the hourly Net XRP purchases,” while noting the lack of data to provide a “statistically significant result.

”

On Friday, September 23, 2016, the VP of Finance, after consulting with Garlinghouse and Larsen and obtaining Garlinghouse’s “go ahead,” directed the Market Maker to “keep the buying light [the day after the announcement] and then do the bigger slug starting Sunday.” The Market Maker agreed.


 On Monday, September 26, 2016, the Market Maker reported to Ripple that it had “spent approximately $200K of the second tranche” and recommended a strategy “to make aggressive markets” going forward, to which the VP of Finance agreed.


 On October 15, 2016, the VP of Finance informed the Market Maker that, after an upcoming announcement, Ripple “would like to go to sales at 1%” of trading volume and asked the Market Maker to “be thoughtful / opportunistic around the timing of implementing 1%” because Ripple did not “want to depress the rally but rather capitalize on the additional volume.

” He further instructed the Marker Maker “to take more money off the table,” if there was a chance to do so.

How execs made efforts to protect the XRP market, especially when it was out of sync with other crypto market moves:

Internally, Ripple executives frequently expressed concern over XRP’s price and planned proactive steps to protect the market.


 For example, in an August 12, 2017 e-mail to Ripple Agent-2 and Ripple Agent-3, Garlinghouse raised concerns about XRP being “squarely left out” of a recent market “rally” and asked whether Ripple’s recent XRP sales were “impacting the market?

” He instructed certain Ripple employees to “proactively” attempt to increase speculative trading value with positive XRP news. 188. Similarly, in September 2019, Ripple’s “Head of Global Institutional Markets” reminded certain Ripple employees that Ripple viewed itself as “Responsible Stewards of XRP.” She expressed concerns about the impact on XRP’s price from increased XRP supply and recommended “buy[ing] [XRP] back” because she was very “worried about xrp at 0.20” and was “DREAD[ING]” an upcoming report—referring to quarterly reports Ripple began publishing in January 2017 (the “Markets Reports”)—if Ripple didn’t “take swift, creative action now (!)”

Later, in approximately June 2020, Ripple employees prepared and delivered an internal presentation for Garlinghouse and Larsen in which the employees highlighted that “XRP began underperforming [Bitcoin]” since early May 2020, partly because of Ripple’s sales of XRP.

The employees proposed “supply limiting tactics,” such as Ripple’s buying back XRP.

How fretting about the price led to “supply limiting tactics”:

Later, in approximately June 2020, Ripple employees prepared and delivered an internal presentation for Garlinghouse and Larsen in which the employees highlighted that “XRP began underperforming [Bitcoin]” since early May 2020, partly because of Ripple’s sales of XRP.

The employees proposed “supply limiting tactics,” such as Ripple’s buying back XRP. 194. Garlinghouse approved the “buy back” option. 195. Following Garlinghouse’s decision, Ripple disclosed on November 5, 2020, in its Markets Report for the third quarter of 2020, that it had purchased $45 million worth of XRP in order to “support healthy markets” and that it may continue to engage in this activity in the future.


 How all of the above activity required public disclosure to be legal:

If Ripple had filed a registration statement and quarterly and annual reports—as it would have been required to do—Ripple’s sales would have been publicly disclosed. They were not.


 How Ripple execs created an Escrow fund to assuage concerns about too much selling:

To assuage investor concerns, on May 16, 2017, Ripple announced that it would place 55 billion XRP (most of its current holdings) into a cryptographically-secured escrow that would restrict Ripple to accessing only one billion XRP every month (the “XRP Escrow”).


 The Proposal to Escrow Ripple’s XRP concluded that the XRP Escrow would be successful if it resulted in “immediate increase in volume and price appreciation” for XRP as one of the “[r]ewards” to counter-balance the increased “[r]isk” of “Cash flow shortfall” for Ripple

Ripple and Garlinghouse publicly touted the formation of the XRP Escrow as proof that Ripple and XRP holders shared a common interest in the success of Ripple’s efforts as to XRP and as one of Ripple’s many efforts to manage the trading market for XRP.


 In other words, by announcing the XRP Escrow, Defendants sought to encourage investors to buy and sell XRP without fear that Ripple could cause XRP’s price to crash—as though the XRP market was a functional market subject to ordinary supply and demand independent of the issuer.

In doing so, Defendants reminded investors of a fact they already knew—that Ripple was committed to undertaking efforts to increase XRP trading volume while supporting XRP’s price.

And some thoughts about who really can exercise influence over offering proceeds:

Investors in XRP do not exercise any control or authority over how Offering proceeds have been or will be spent. Ripple possesses sole discretion to decide how to do so. 262.

Because certain Ripple executives publicize that they hold XRP, and some (including Garlinghouse) state that they hold it as an investment, it is reasonable for a holder of XRP to expect these individuals to undertake efforts to increase the value and price of XRP.

How the SEC clocked HODL:

Later, he reiterated, “I remain very, very, very long XRP, . . . I’m on the HODL side,” referring to a digital asset industry term meaning to be long on an asset for long-term gains.


 How nobody was using XRP to actually transact:

On June 21, 2018, Garlinghouse explained in a public speech that nobody was using XRP to effect cross-border transactions as of that date. Instead, he said that Ripple “expect[ed] this year for at least one bank to use XRP in their payment flows, to use xRapid [ODL].

”

Ripple did not commercially launch ODL until October 2018. 338. Since its launch, ODL has gained very little traction, in part due to certain costs of using the platform. From October 2018 through July 26, 2020, only fifteen money transmitters (none of which are banks) signed on to potentially use ODL, and ODL transactions comprised no more than 1.6% of XRP’s trading volume during any one quarter (and often substantially less).


 What onboarding there was was subsidised by Ripple:

Much of the onboarding onto ODL was not organic or market-driven. Rather, it was subsidized by Ripple. Though Ripple touts ODL as a cheaper alternative to traditional payment rails, at least one money transmitter (the “Money Transmitter”) found it to be much more expensive and therefore not a product it wished to use without significant compensation from Ripple.


 Between early 2019 and July 2020, the “Money Transmitter” conducted the overwhelming majority of XRP trading volume in connection with ODL. Ripple had to pay the Case 1:20-cv-10832 Document 4 Filed 12/22/20 Page 57 of 71 58 Money Transmitter significant financial compensation—often paid in XRP—in exchange for the Money Transmitter’s agreement to help Ripple increase volume on ODL.


 Specifically, from 2019 through June 2020, Ripple paid the Money Transmitter 200 million XRP, which the Money Transmitter immediately monetized by selling XRP into the public market, typically on the very days it received XRP from Ripple.

The Money Transmitter publicly disclosed earning over $52 million in fees and incentives from Ripple through September 2020.

The Money Transmitter became yet another conduit for Ripple’s unregistered XRP sales into the market, with Ripple receiving the added benefit that it could tout its inorganic XRP “use” and trading volume for XRP.

The Money Transmitter has served that principal purpose for Ripple in exchange for significant financial compensation.

And finally how executives kept the incentive programmes quiet from the public:

Ripple and Garlinghouse did not disclose to XRP investors or the public the full extent of incentives that Ripple provided to the Money Transmitter in return for its assistance in increasing XRP trading volume. 344.

For example, in a September 12, 2019 interview on CNN, Garlinghouse refuted speculation that Ripple was manufacturing demand for ODL and claimed: “When [the Money Transmitter] is moving money from U.S. dollar to Mexican peso, they’re buying [XRP] at market.

There’s no special sweetheart deal there.” While the Money Transmitter was buying XRP in the market at current market prices (not from Ripple), Garlinghouse did not disclose that Ripple was paying the Money Transmitter significant financial incentives to do so. 345. Even after ODL’s launch, Ripple publicly acknowledged in July 2019 that XRP has no significant use beyond investment, as alleged in paragraph 211 above.


 No mention, sadly, of the extensive social media PR war that was waged by the XRP army online to the benefit of the Ripple community. Or of Ashton Kutcher’s promotional activity on The Ellen DeGeneres Show. But we are sure it won’t have gone unnoticed.

JPMorgan strategists have said the odds of a bitcoin correction would rise if flows into the Grayscale Bitcoin Trust slow down dramatically.

• Such a drop in flows into the largest bitcoin (BTC, -4.88%) fund would increase the likelihood of a price correction similar to the one seen in the second half of 2019, according to a note from the bank's quantitative strategists led by Nikolaos Panigirtzoglou, as reported by Bloomberg Monday.
• The digital asset manager's bitcoin inflows “are too big to allow any position unwinding by momentum traders to create sustained negative price dynamics,” the strategists said.
• They stopped short of saying bitcoin is overbought after the cryptocurrency soared to consecutive record highs in recent weeks.
• The most recent data tweeted by Grayscale Investments showed the firm reached $15.5 billion in cryptocurrency assets under management on Dec. 18 – up $2 billion in less than a month. Its Bitcoin Trust is now worth over $13 billion of that total.
• Bitcoin hit a new record price of $24,273 on Sunday. At the time of publication, prices were lower at around $23,450.
• New York-based Grayscale is owned by Digital Currency Group, the parent company of CoinDesk. The firm allows institutional investors to buy shares in its crypto trusts, gaining exposure to the asset class without having to own the asset directly.

Bitcoin price surpassed $20,000 with ease on its third retest, buoyed by a surge in buy volume. Following the breakout, analysts anticipate the dominant cryptocurrency to eventually rise to the mid-$30,000s.

However, in the short term, the expectations of a pullback are growing.There are compelling arguments for both short-term bull and bear cases. Traders who are highly optimistic in the near term state that the surge past $20,000 has confirmed a new bull trend.

With no technical resistance above it, a continuation of the rally is anticipated. Because there is no historical data to rely on above $20,000, Bitcoin (BTC) has entered unprecedented territory.

Analysts who are short-term cautious expect Bitcoin to face some retracement in the foreseeable future. The $20,000 level remains an attractive support level because it is the previous all-time high reached in December 2017. A retest of the previous peak would be a textbook technical pattern, which would reset everything and make the derivatives market less crowded.

Where will Bitcoin go in 2021?

The options market is pricing a potential Bitcoin rally up to between $36,000 and $50,000 in the medium term. This shows that many options traders are expecting the Bitcoin rally to continue into 2021. A larger uptrend in early to mid-2021 would mean that BTC replicates the post-halving trend it saw in 2017.

In 2016, Bitcoin saw its second block reward halving, and 15 months after that, it peaked at around $20,000.Denis Vinokourov, head of research at Bequant, told Cointelegraph that the options market pricing Bitcoin at $36,000 during a rally does not necessarily mean traders expect it to reach $36,000.

For example, he explained that the probability of the $36,000 strike is currently at 12%, which is relatively low. Hence, while $36,000 and $52,000 could materialize, for now, the probability still remains low:

“The options market is as much about trading mis-pricing and hedging as it is about a directional play. The fact that there is a huge open interest resting at such a high strike doesn’t mean that the underlying will trade there, although it's reasonable to expect some price attraction. There is also high OI at $52,000, but the delta (probability) is slim at four percent.”

Guy Hirsch, managing director for the United States at eToro, said that options interest suggests a rally to the mid-$30,000s could occur. But Hirsch emphasized that it is too early to call a peak for Bitcoin, especially considering that it has just surpassed the all-time high. It has been less than 72 hours since BTC broke past its record high, and it has yet to establish a support level and near-term resistance levels.

Short-term bearish scenario puts Bitcoin at $20,000

Both Vinokourov and Hirsch anticipate that dips are likely to occur following the recent rally. Historically, throughout the bull cycles seen in 2017 and 2019, Bitcoin saw 20% to 40% pullbacks, which were useful to reset the derivatives market.

Pullbacks can make rallies more sustainable because they prevent uptrends from becoming overheated and overwhelmed with buyers.Hirsch told Cointelegraph that $20,000 and $15,000 are potential areas Bitcoin could correct to if confidence dwindles.

But if Bitcoin’s momentum continues to strengthen, he believes Bitcoin could simply consolidate higher. Even if pullbacks occur, Hirsch emphasized that dips would be short-lived due to the clear increase in institutional demand. He explained:

“Either we consolidate and move higher as institutions take advantage of the buying opportunity, or confidence falls and we see a drop possibly to as low as $15,000, as some including even JP Morgan have suggested.

”Generally, analysts expect large corrections, if they occur, to be bought up by institutional investors quickly. Vinokourov said that if profit-taking occurs, it would be the institutional investors rebalancing their portfolios. Hence, in this scenario, retail investors could begin buying the dip, with institutional investors accumulating later on.

Although institutions have continued to buy throughout 2020, some institutions and accredited investors have been buying since $4,000, according to Vinokourov, who added:

“The price action following the break of $20,000 has been very much one-sided but, as it stands, there is no sign of liquidity drying up or market makers getting it wrong and blowing up. Instead, the price action remains well-managed thanks to an influx of retail flow, as much as institutional. Profit taking is not something that retail looks to be contemplating just yet, so any rebalancing by the institutional side will likely be met by dip buying flow.”

The most ideal scenario for Bitcoin?

Bitcoin has continuously rallied since September, with one major dip to $16,000 in November. Other than that, BTC has not seen large pullbacks or long squeezes like in 2017. This has some analysts pondering whether the market dynamics have changed for Bitcoin and large corrections are less likely to happen.

One of the main reasons behind the lack of severe corrections is Bitcoin’s declining reliance on the futures market. Spot volumes have been growing, fueled by the rising institutional demand across venues such as Grayscale, CME and Bakkt.

Hence, long and short squeezes could have a smaller impact on the price trend of Bitcoin.

The most favorable trend for Bitcoin, according to Hirsch, would be the establishment of a clear support area and lowering volatility, at least for a while.

The volatility of Bitcoin has been increasing intensely for a prolonged period, which has rattled the markets every time a major price movement has occurred.

According to Hirsch: “It’s important to realize that, with each passing month, we have been consistently hitting higher highs and higher lows. The latter is important because it is a strong indicator of increased adoption.”

Bitcoin has had an incredible 2020, more than doubling in price since the beginning of the year—with some predicting it will continue to climb.

The bitcoin price has recently soared to its 2017 all-time high but has failed to break through the psychological $20,000 per bitcoin barrier.

Now, after bitcoin's rally has helped catapult cryptocurrencies back into the headlines, investors are eyeing the sky-high returns of smaller so-called "alt coins"—including ethereum, Ripple's XRP and chainlink.MORE FROM FORBESAnother Crypto Skeptic Suddenly Flips To Bitcoin-But Adds A Stark WarningBy Billy Bambrough



The bitcoin price has been boosted by unprecedented central bank money printing this year, putting ... [+] GETTY IMAGES

Bitcoin has found support this year from investors looking to hedge against the inflation they see on the horizon, solidifying bitcoin's reputation as digital gold.MORE FOR YOUForget Google—Could China Be About To Destroy Bitcoin?PayPal Just Gave 346 Million People A New Way To Buy Bitcoin—But There’s A Nasty CatchAnother Crypto Skeptic Suddenly Flips To Bitcoin—But Adds A Stark WarningThe bitcoin price has added 150% over the last 12 months but has been left in the dust by the price increases some other cryptocurrencies have seen, many of which have soared amid a flurry of interest in decentralized finance (DeFi)—using crypto technology to recreate traditional financial instruments such as loans and insurance.

Ethereum, the world's second-largest cryptocurrency by value on which many DeFi projects are built, has added 300% over the last 12 months (some think it's still got a long way to run).

Ripple's XRP, the third-largest cryptocurrency, has jumped 165% with most of its gains coming in just the last month.Chainlink, a cryptocurrency and blockchain network used by DeFi and broader projects to link up data sources, APIs, and payment systems, has added a staggering 500% through 2020.Among smaller tokens, cardano and stellar lumens, two top-ten cryptocurrencies, have added 300% and 200% respectively.

These massive rallies are dwarfed by the returns recorded by a handful of more minor cryptocurrencies. Yearn.finance, used by investors seeking interest-like yield to move funds around the DeFi ecosystem, has climbed a mind-blowing 2,600% in just the last year.


MORE FROM FORBESForget Google-Could China Be About To Destroy Bitcoin?By Billy Bambrough





The yearn.finance price has exploded this year, spiking to record highs over the summer before ... [+] COINBASENEM, a cryptocurrency that powers the New Economy Movement blockchain, has added 550%, while theta, the cryptocurrency token of a blockchain powered network purpose-built for video streaming, has soared almost 800%.

The ethereum price has been boosted by confirmation the ethereum network will this month begin a long-awaited upgrade that those in the cryptocurrency community hope will help ethereum scale.

"The recent rally in ethereum is associated with multiple factors," Kosala Hemachandra, the chief executive of MyEtherWallet, said via email, pointing to ethereum "benefiting from the overall crypto rally," and the beginning of the "first phase of Ethereum 2.0."

"These price movements aren’t necessarily due to a decrease in supply, but because of the fame and excitement that comes around the innovation in blockchain technology. This is just the initial phase (phase 0) of the ethereum 2.0 roll-out, building the foundation for ethereum 2.0’s success.

I expect that ethereum will continue to gain prominence in mainstream circles as we hit future ethereum 2.0 milestones.

"Meanwhile, other bitcoin and cryptocurrency investors are confident there has been a shift in sentiment this year.

“There are several factors that allude to a permanent shift in sentiment towards bitcoin," James Butterfill, investment strategist at CoinShares, Europe's largest digital asset manager with $1.8 billion in assets under management, said via email.

"On an anecdotal level, based on our client conversations over the course of 2020, we have seen a decisive shift from enquiries of a speculative nature to those that begin with comments such as, 'bitcoin is here to stay, please help us understand it.'"


Follow me on Twitter. 



Billy Bambrough

I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported… Read More

A new cryptocurrency token, launched by Steve Wozniak’s new green energy and blockchain project Efforce, has surged in value since last week’s listing on one of the world’s largest crypto exchanges.

Wozniak’s Efforce became fully operational last week. The project that aims to transform and disrupt the energy efficiency market and allow any investor “to help the planet,” became only the second business venture for the Silicon Valley legend almost half a century after he co-founded Apple.

“We created Efforce to be the first decentralized platform that allows everyone to participate and benefit financially from worldwide energy efficiency projects, and create meaningful environmental change,” Wozniak said in a statement. 

ALSO ON RT.COM

Apple cofounder Steve Wozniak sues YouTube & Google over bitcoin scam

Shortly after its launch, Efforce listed the token named after Wozniak under the ticker WOZX on the HBTC exchange.

The new cryptocurrency attracted $950 million in the first 13 minutes, the company said in a press release on Friday. Boosted by enormous investor interest, WOZX surged by nearly 1,400 percent since it started trading, rising from the initial price of $0.1 to $1.41 seen on Monday. 

The token is set to start trading on a smaller exchange Bithumb Global next week, Efforce announced.

Cryptocurrency is not an obvious candidate to cut greenhouse gas emissions. Just mining bitcoin, the primary blockchain-based cryptocurrency, emits about 22 megatons of carbon per year (the precise number is hard to pin down).

But Apple’s co-founder Steve Wozniak is backing a new cryptocurrency promising to do just that.

The WOZX, launched by the energy-efficiency crowdfunding company Efforce, entitles holders to a share of profits from energy efficiency projects around the world.

Wozniak says this crowdfunding approach will allow anyone to invest in the growing $250 billion energy efficiency market and lead to “meaningful environmental change,” according to a company statement on Dec. 4.

Private investors have responded positively: They’ve already invested $18 million at an $80 million valuation, according to the company, but the crypto world appears to be even more enthusiastic.

During the first days of public trading, the WOZX shot up from 22 cents per token on Dec. 2 to more than $1.50 just five days later—all before a single project has been developed.

While the new cryptocurrency may already be generating profits for its investors, it’s less clear the energy efficiency industry needs a blockchain to be successful.

How does WOZX work?

When someone buys WOZX, they’re buying a proxy for a stake in an energy efficiency project: typically upgrades to infrastructure, from LED lights and window glazing to thicker insulation and more efficient power generators.

Energy services companies register their proposed projects with Efforce, which assesses the required investment and writes a contract outlining expected returns.

These projects are then financed by investors (or “contributors”) buying the WOZX cryptocurrency, whose transactions will be tracked on a distributed, verified online ledger called a blockchain.

Once the upgrades are done, smart meters record the energy savings produced—savings that are automatically distributed to WOZX holders’ accounts as “energy credits.

” These megawatt-hour credits can then be used to offset electricity bills, or be sold back to Efforce for cash.Sound complicated? It is.

These financial gymnastics are necessary because WOZX buyers aren’t accredited investors in the eyes of regulatory bodies. That limits the ability of entities like Efforce to sell them securities.

But the WOZX token isn’t technically an equity stake: It’s a token that generates a share in project proceeds and distributes them as credits, according to Andrea Castiglione, another Efforce co-founder.

What’s the return on energy efficiency?

Right now, the utility-offset credits are only recognized by certain Italian utilities giving holders the right to offset their own bill, though Efforce says the number of utilities will expand in the future. That means for most people, the returns on WOZX will come from selling their credits, or appreciation of the token over time.

So how much money can “contributors” expect to earn? Energy savings projects typically generate returns around 20%, Castiglione claims, predicting investors may reap half of those returns. “We can say the investment returns are predictable,” he said, “but there is some risk involved,” citing project risks and the value of the token itself.

That risk will also depend on the types of projects Efforce chooses to register and assess. Castiglione says Efforce will handle the first 20 projects itself starting in the first quarter of 2021 (Efforce’s parent company is a licensed energy services company).

The first two prospective projects are a 9 megawatt industrial electricity, heating, and cooling plant in Italy, and a hotel complex on the French Rivera. Efforce will then open up the platform to 30 partners in the energy services industry.

Can crypto really help cut emissions?

If successful, Efforce says, the energy efficiency market will see a huge influx of new investment from individuals and the world will see rapid reductions in the growth of global emissions.

But Vikram Aggarwal founder of EnergySage a marketplace for residential solar power, and former vice president at a Fidelity private equity fund, says most projects should be able to secure institutional financing.

“As long as you have a methodology for how this is going to generate returns,” he says, “I don’t think there is a shortage of capital.” Generate Capital, for example, recently agreed to finance $600 million in such energy efficiency projects through the energy services company Alturus.

In other words, WOZX won’t necessarily upend the market for energy efficiency.Aggarwal argues the enormous pools of available private equity might not justify the complexity of Efforce’s cryptocurrency approach.

“Blockchain in my mind has become a four-letter word,” he says. “It looks like everyone approaching us in the last few years says, ‘I’m an expert in blockchain.

Do you have a problem I can solve using blockchain?'”Wozniak is a believer. His crypto ambitions have fueled speculation since 2018, when the software engineer announced on CNBC that he hoped bitcoin would become a single global currency—“because that is so pure thinking,” he said at the time.

He then joined a crypto venture founded by a British baroness (which later collapsed), according to the Financial Times.The Woz’s backing of WOZX is a reason this blockchain application may succeed where others have failed.

Efforce tried and failed to raise as much as $53 million in 2019 amid turmoil in the market; the company said it had been waiting to publicize Wozniak’s role as a co-founder until its technology was “on an industrial level.

” Now, Efforce claims the rising price of WOZX suggests a valuation of more than $1 billion.

LAST YEAR, WHEN Facebook officials were hauled in front of Congress to defend their plans for a cryptocurrency called Libra, they arrived with a pitch about financial inclusion.

With Libra, people anywhere in the world would have access to a common payment network, they said, whether or not they had access to a bank. All it would take was a phone and a Facebook account.

Representative Rashida Tlaib, (D–Michigan) a member of the “squad” of progressive first-term lawmakers, had heard similar pitches before.

Her Detroit district, the third-poorest in the country, is populated with the very unbanked people Facebook executives were describing. In the past, they had been promised faster tax returns, paycheck advances, or check cashing without a checking account.

But these offerings came with little regulation, and often with excessive fees or interest rates. Now, here was Libra, a cryptocurrency that also seemed poised to fall through the regulatory cracks, backed by an industry with a lot of power and data.

She wondered if this was the next iteration.“People don’t realize that this is coming. I feel like a mama bear, and I have to watch out for what is coming for my district and my neighborhood,” Tlaib says. That’s why she wants to talk with you about a thing called stablecoins.

Not familiar? Eyes glazing? It’s a bit niche, for now. Stablecoins are a form of digital currency that, as the name suggests, hold a constant value. That’s what Libra is, technically, but there are many other flavors.

Stablecoins might be backed by an actual currency or a basket of assets, or they might use algorithmic tricks to hold steady, but the point is that their price in, say, dollars, doesn’t change. It’s a promise.

Stablecoins were initially used to help with buying and selling volatile cryptocurrencies like bitcoin. But increasingly, some stablecoins, like Libra, have been proposed for more common uses, like paying for actual stuff. That’s because they can be fast, easy to use on phones, and are, well, stable.

“I feel like a mama bear, and I have to watch out for what is coming for my district and my neighborhood.

”REPRESENTATIVE RASHIDA TLAIB (D–MICHIGAN)

The problem is that stablecoins are not much more familiar to members of Congress and regulators than they are to you and me. In the Facebook hearings last year, everyone seemed to want Libra to be regulated, but the unanswered question was how.

So this week, Tlaib introduced a bill, cosponsored by representatives Stephen Lynch (D–Massachusetts) and Chuy Garcia (D–Illinois), that offers a possible solution: requiring stablecoins that promise a fixed value in US dollars to be issued by banks.

That, the legislators argue, constitutes taking a deposit, which is something only banks can do—not tech companies nor the associations they set up to issue coins on their behalf.

That logic takes aim squarely at Facebook’s stablecoin plans. This year, while we were worrying over social distancing and reproduction values, Libra went through major changes.

Instead of a global, borderless coin backed by a number of currencies and assets, it’s now proposed as a series of coins for different places: a coin for Europe denominated in euros, a coin for the United States denominated in dollars, and so on.

 That’s given some relief to central bankers who were concerned that Facebook's currency would compete with their ability to control the local money supply. Libra also abandoned a plan to eventually let anyone build services on its network, a feature that raised money laundering concerns, in favor of a closed system controlled by its official members.


Oh, and there were a few naming tweaks along the way. Facebook’s Calibra division, which is designing the company’s Libra wallet, now wants to be called Novi. And earlier this week, Libra itself—both the currency and the association that issues it—became Diem. Got that? Novi deals Diem.

Think of it as an effort to assert the project’s independence from Facebook—though, as a reminder, the company did come up with the idea, built most of the technology, set up the association with close allies, and will likely provide by far the most users for whatever coins are eventually issued.

Those changes appear to have cleared the way to get Diems into people’s Facebook accounts. The initial Libra model raised plenty of red flags for regulators, but the most obvious stumbling block was that a coin backed by a bundle of assets, including dollars, euros, yen, and bonds looked to some like a security.

Declaring it so would kick in regulations that would make it impractical as money. But the new Diem model, where one Diem dollar represents one US dollar, looks more like moving money within Venmo or Square.

So the Diem association members that plan to offer digital wallets for the coin, like Facebook’s Novi, are following a similar path of labeling themselves money transmitters, which in the US involves the burdensome but ultimately trivial process of seeking licenses from all 50 states.

A Financial Times report this week suggested Diems could be issued by the Diem Association as soon as January, pending approval from financial regulators in Switzerland, where it is based.

The WIRED Guide to Bitcoin

The cryptocurrency represents amazing technological advances. Bitcoin has a way to go before it's a a true replacement for, or even adjunct to, the global financial system.

Requiring stablecoin issuers to be banks would erect a much bigger hurdle. The idea is to establish “bright lines” between finance and tech that have been blurred by products like stablecoins, says Raul Carrillo, a research scholar at Yale University who gave input on the bill.

He says it’s important to establish clear regulations early on for new products like stablecoins. Big tech companies like Facebook are largely shut out of obtaining bank charters, because of traditional barriers between banks and retailers, as well as antitrust scrutiny that such a move would likely raise. Another option would be to ask a bank to issue Diems.

Carrillo says that even that degree of separation, along with rules placed on banks, would be a good start to Facebook and Diem’s ambitions in check.

Facebook, however, is not the only company interested in stablecoins. If the bill were enacted, a small but growing industry of stablecoin issuers would likely need to rethink their strategy.

That includes companies like Circle, which said Wednesday it had partnered with Visa to issue a credit card that would allow businesses to use its stablecoin called USDC, or US Dollar Coin. In an email, Jeremy Allaire, Circle’s CEO, called Tlaib’s bill a “huge step backward for digital currency innovation.

” A Diem spokesperson said the association does not comment on pending legislation, and a spokesperson for Novi said the company was still reviewing the bill.

Brian Brooks, the acting US comptroller of the currency who was recently nominated by President Trump for a five-year term, describes the bill as “a solution searching for a problem.”

He says some of the provisions, such as ensuring adequate reserves and the ability to redeem stablecoins for dollars, can be handled without requiring issuers to become banks, which he argues would stifle competition.

“What if email got invented and somebody said only the post office can issue email accounts?” he asks.

As acting comptroller, Brooks has advocated for more flexibility for non-banks that want to provide digital payment options, including stablecoins.In Tlaib’s view, a little more friction for private issuers wouldn’t be a bad thing.

She would prefer to see digital coins issued directly by the US government—which could be accessed by individuals through accounts at local post offices or directly through accounts at the Federal Reserve. That’s for all the same reasons Diems might appeal to people in her district, she says: ease, low costs, and simplicity.

It could be a way, for example, to get Covid-19 relief (should that ever happen again) to people sooner than mailing checks. The important thing, as she sees it, is to level the playing field at the start.

“I just know the people who are going to be impacted from not truly having oversight are people who are underbanked and unbanked,” Tlaib says.

“They’re going to talk at them, and it’s going to look very shiny and great and easy. They can label it whatever they want, rebrand it, but it’s going to be communities like mine that will be hurt by their experiments.

”Will such a bill pass in the tumultuous final weeks of the Trump administration? Not likely, says Judith Rinearson, a law partner at K&L Gates who closely follows fintech regulation. “But it’s a sign of where the winds are blowing,” she says. The legislators plan to reintroduce a version of the bill next year.





Gregory Barber is a staff writer at WIRED who writes about blockchain, AI, and tech policy. He graduated from Columbia University with a bachelor’s degree in computer science and English literature and now lives in San Francisco.

Bitcoin’s true believers are taking a victory lap after the cryptocurrency’s fresh all-time high of almost $20,000. “Onward and upward we go to the moon!” tweeted Tyler Winklevoss.

“All governments, [financial services] and corporations will soon be mining Bitcoin to guarantee their own supply,” echoed Bitcoin advocate Charlie Shrem. That appears to be true of the Venezuelan Army, at least.

But is this new record going to convert an often-skeptical financial sector, at least beyond hedge funds and strategists who see Bitcoin as a COVID-19 safe haven? Not everyone is convinced.

Last month, as the cryptocurrency hit $18,000 for the first time since 2018, Jamie Dimon at JPMorgan Chase & Co. said he hadn’t changed his mind since he called Bitcoin a fraud during its 2017 bubble.

“We’re a believer in cryptocurrency, properly regulated and properly backed,” he said, adding, “Bitcoin’s kind of different, and that’s not my cup of tea.

”Dimon’s stance ultimately reflects the mood inside bulge-bracket banks that have been dipping their toes in crypto waters. Forged during the 2008 financial crisis as an artificially scarce, cryptographically secure way to bypass traditional finance, Bitcoin won’t be viewed as an existential threat to the banking system just because its price is soaring. But it won’t be ignored either. Rather it will be seen as a spur toward a more digital, regulator-friendly post-COVID payments future.

We’ve seen big banks seek to make money from Bitcoin without handling it directly, reflecting fairly limited client demand and a lack of regulatory clarity. That’s still the preferred option. Morgan Stanley began clearing cash-settled Bitcoin futures in 2018, while JPMorgan this year adopted crypto exchanges Coinbase Inc. and the Winklevoss twins’ Gemini Trust Co. as corporate-banking clients.

Bolder proposals such as Goldman Sachs Group Inc.’s bid to open a crypto trading desk never really got anywhere.

The long list of risks highlighted by the Bank for International Settlements, from money laundering and terrorist finance to reputation, might have something to do with it. A survey of financial assets between 2010 and 2019 on the Bank of England’s staff blog found that Bitcoin’s market downside risk was 44%, steeper than stocks or gold.

None of this would normally be insurmountable for bankers when there’s real money to be made. But even with serious sums changing hands on crypto exchanges, and funds such as Guggenheim Partners LLC eyeing Bitcoin, the proverbial phone still isn’t ringing off the hook.Even parts of the banking sector willing to go further know they need regulators on board.

Singapore’s DBS Group Holdings Ltd. is planning to run its own digital currency exchange for qualified investors, but only once it receives regulatory approval.

There’s certainly more oversight in 2020 than there was in 2017: European Union anti-money laundering rules now extend to crypto exchanges, and U.S. regulators allow banks to offer cryptocurrency custodian services. Still, European Central Bank boss Christine Lagarde this week reiterated Bitcoin and its ilk were “highly volatile, illiquid and speculative.

”The bigger question for Wall Street banks therefore isn’t Bitcoin itself but what comes next, especially since its clunky flaws as a method of payment are well-known. Central banks and private companies alike are scrambling to hit upon a mass-market alternative that might fix them.

That might involve central bank-issued tokens like a digital euro, which is at least five years away, or a privately issued coin like Libra, which may be just one month away. Banks’ business models might be vulnerable.

For JPMorgan, it makes sense to pursue blockchain ideas like JPM Coin that could save money for banks in payments. The advantage isn’t just potential cost savings, but also attracting smart tech talent, as seen by LVMH executive Ian Rogers’s move to crypto hardware startup Ledger.

Lenders have no choice if they want to compete with digital rivals out to eat their lunch. Paypal Holdings Inc.’s recent foray into Bitcoin is part of a broader fintech push with apps like Venmo.

The firm is also speaking to regulators about digital wallets. In a post-pandemic world of low rates and rising defaults, banks are worried about the tech crowd. After all, in the euro zone nonbanks overtook traditional banks’ market share of deposit-taking and lending in 2018, according to the Centre for Economic Policy Research.

Crypto may be making a comeback after a long winter, but when it comes to Bitcoin, bankers can afford to hibernate a little longer. Staying one step removed, by offering banking services to money-spinning exchanges or facilitating futures trades, is the equivalent of selling pickaxes and shovels during the gold rush.

Dimon’s right to hold back.Lionel Laurent is a Bloomberg Opinion columnist covering the European Union and France. He worked previously at Reuters and Forbes.

Bitcoin has come a long way since bottoming out below $4,000 in March. The cryptocurrency clocked a record high above $19,900 early Tuesday and is up nearly 170% this year.

While institutional participation has increased, a large part of the retail crowd may have stayed away from the market. For that group, the fear of missing out (FOMO) on the opportunity to make triple-digit gains may have set in over the past few weeks.

Yet, investing now while the cryptocurrency is trading near lifetime highs may seem risky because there is always a possibility of significant price pullback. Bitcoin has seen several pullbacks of over 20% during the previous bull markets. 


As such, investors looking to buy bitcoin (BTC, +0.77%) now should consider implementing a dollar-cost averaging (DCA) strategy, according to leading traders in the cryptocurrency space. 

“It is a good way to build exposure to both bitcoin as well as other asset classes such as global equity indices, as both look set to perform well against a backdrop of negative real rates for the next few years,” Scott Weatherill, chief dealer at the over-the-counter liquidity provider B2C2 Japan, told CoinDesk.

How dollar-cost averaging saves money

DCA, also known as the constant dollar plan, involves buying smaller amounts of an asset at regular intervals, regardless of price gyrations, instead of investing the entire amount at one time.

The strategy helps investors take the emotion out of their trades and can result in a lower average purchase cost because markets seldom move higher without pullbacks. 

Read more: 5 Reasons Why Bitcoin Just Hit an All-Time High Price“Dollar-cost averaging in bitcoin has historically been a very profitable strategy that lowers drawdown risk,” Weatherill said. 

To illustrate, let’s say an investor has been accumulating $100 worth of bitcoin at the highest price observed on the 17th of every month, starting from Dec. 17, 2017, when bitcoin peaked at $19,783.

As of press time, that investor would own roughly 0.48 BTC at an average cost of around $8,660. It also means the investor would be making a nearly 120% gain at the current market price of $18,850.




Bitcoin prices, Nov. 30, 2017, to Dec. 1, 2020. Buying at the top would have meant missing cheaper entry points in subsequent months.

However, if the investor made a lump-sum investment at the record price of $19,783 on Dec. 17, 2017, the investment would currently suffer a loss of 4.7%. Over a long period, that loss could be more significant when adjusted for inflation.



Dollar-cost averaging in actionSource: Omkar Godbole

In the former case, the investor spread out $3,600 over 36 months, buying fewer bitcoin when prices were high and more when prices were low. That helped pull down the average cost and bring in a substantial gain.

The strategy has delivered similar results during the previous bull-bear cycles. “Ideally, one must invest with a hope of selling at higher prices in the long run,” Chris Thomas, head of products at Swissquote Bank, said. “The best way, in my opinion, is to buy each month and build up a position over the longer term.”

The risk of certain option strategies for retail traders

Some investors may think of implementing synthetic strategies through the options market, such as buying a put option against a long position in the spot market. The put would gain value in the event of a sell-off, mitigating the loss (on paper) in the long spot market position. 

Yet, such strategies are more suitable for speculators who intend to profit from short-term price volatility and go against the idea of pulling down the average purchase cost via DCA. “I wouldn’t recommend buying puts if you are ‘DCAing,’ as it would crimp returns,” Weatherill said. 

A put option is a derivative contract that gives the purchaser the right but not the obligation to sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy. 

An option buyer needs to pay a premium upfront while taking a long call/put position. A long put position makes money only if the asset settles below the put’s strike price on the day of expiry. Otherwise, the option expires worthless, causing a loss – in this case, the premium paid – for the buyer. 

Read more: Bitcoin Price Sets New Record High of $19,850

What’s more, those trying to combine DCA with an options hedge may end up hurting their portfolios. For example, if an investor buys puts while DCAing and the market goes up, the options bought to hedge against a potential downturn would bleed money, crimping overall returns from dollar-cost averaging. 

“Retail investors should stay away from options trading,” warned Thomas. He added that one particular strategy, selling out-of-the-money calls, is extremely dangerous. 

Savvy traders often generate additional income by selling call options well above bitcoin’s current spot price and collecting premiums on hopes the market wouldn’t rally above the level at which the bullish bet is sold. However, with short call positions, holders can theoretically suffer unlimited loss because the sky’s the limit for any asset. 

In the case of bitcoin, that’s particularly risky as sentiment remains bullish, with analysts expecting a continued bull run on increased institutional demand. As such, selling call option(s) while DCAing could prove costly. 

“While there may be a temptation to optimize through various trading strategies, the new money should stick to sure strategies: 1) stay long, and 2) buy dips,” said Jehan Chu, co-founder and managing partner at Hong Kong-based blockchain investment and trading firm Kenetic Capital. 

• Ether, the world’s second-largest virtual currency by market value, is up about 350% since the start of the year.
• Investors are keeping an eye on a long-delayed upgrade to its underlying network known as Ethereum 2.0.
• Proponents say that the planned upgrade could allow thousands more transactions to take place every second.

Ether, the digital token of the Ethereum blockchain, is the second-largest cryptocurrency in the world by market value.

Jaap Arriens | NurPhoto via Getty Images

While you’ve been watching the price of bitcoin soar to an all-time high, another cryptocurrency has been quietly staging a comeback of its own.

Ether, the world’s second-largest virtual currency by market value, is up about 350% since the start of the year. Last week, it briefly passed $600 for the first time since June 2018 before slumping sharply, and touched that level again this week.

Now, ether investors are keeping an eye on a long-delayed upgrade to its underlying network known as Ethereum 2.0, which they say will make it faster and more secure.

A key problem with the Ethereum blockchain today is scalability. In 2017, for example, the popularity of an Ethereum-based game called CryptoKitties caused the network to become heavily congested, significantly slowing trade.

But proponents of Ethereum 2.0 say that the planned upgrade could allow thousands more transactions to take place every second. Meanwhile, investors believe it could also lead to further adoption of ether as well as price appreciation.

‘Proof of stake’

To understand the transition taking place on Ethereum, it’s important to first know a little about blockchain technology. Blockchain is the digital ledger originally used to record bitcoin transactions and provides the foundation for most major cryptocurrencies.

Like bitcoin, Ethereum’s blockchain currently operates on a “proof of work” model. So-called “miners” with purpose-built computers compete to solve complex mathematical puzzles to validate transactions. Whoever wins that race is then awarded in bitcoin.

On Tuesday, the Ethereum blockchain is set to begin a transition to a “proof of stake” model. Instead of miners, the network will rely on “stakers” who already hold some ether to process new transactions.In order to validate a transaction on the new network, a staker must deposit 32 ether tokens, worth about $19,600 at current prices, into a crypto wallet using what’s known as a smart contract.

These are contracts on the Ethereum blockchain that are automatically executed using code.

The stakers are then awarded ether for validating transactions, like crypto miners. This process of “staking” effectively gives crypto investors the ability to earn interest on their holdings after a certain period of time. 

A big theme in Ethereum right now is decentralized finance, or DeFi, which aims to replicate traditional financial products such as loans without middlemen like the banks. Some crypto evangelists say Ethereum’s ability to support apps mean it could become a structure for a decentralized, next-generation internet.

“In essence, the Ethereum ecosystem has made the decision to grow up a little more and become a little more secure so that people, institutions and developers can continue to build more apps and financial products on top of it,” Konstantin Richter, CEO of blockchain software firm Blockdaemon, told CNBC.

What does it mean for investors?

For now, what’s happening is the introduction of a parallel Ethereum blockchain known as Beacon. This will be used to test the new proof of stake system ahead of a full migration to Ethereum 2.0.“It’s a little bit like the launch,” Richter said. “The rocket is now taking off.

We’ve committed to the journey. We’re still on the launchpad but all will be achieved when we land on the moon. At this point, we’re launching the official end to the old Ethereum.”In the meantime, more and more ether is getting stashed away for a restrictive multi-year “lockup” period by token holders seeking to become validators of transactions on the new network.

That could throttle the supply of ether, potentially increasing the value of the asset if demand starts to outpace supply. Richter also sees it leading to innovation in the DeFi space as investors look to get some liquidity by borrowing against their locked up ether holdings.

Another big development the upgrade will introduce is something called “sharding.” This effectively splits the network into lots of parallel chains that can handle transactions to speed up the network.

“A sharded blockchain can be pictured as a round hair brush where each row of bristles are a shard behaving as a blockchain on its own and where the Beacon-chain links them all together as the hair brush handle does for the bristles,” Jerome de Tychey, co-founder and president of Ethereum France, told CNBC.

“The shards communicate with each other via the Beacon-chain, which also regularly finalizes the state of the shards. As time goes the hair brush lengthens as shards produce blocks and so does the Beacon-chain which keeps track of what happens in the whole network.

”Further down the road, crypto experts say Ethereum 2.0 should help the Ethereum network run at scale, processing lots more transactions at a faster pace and supporting apps with millions of users.

“Within five to 10 years, these decentralized platforms will be on par with centralized platforms,” Richter predicts. “Then it’s gameover for the centralized platforms.”

In a fragmented global market, price quotes are all over the place. That’s why CoinDesk created the Bitcoin Price Index (BPI).

The current debate over what exactly is the all-time-high price of the leading cryptocurrency shows how a sector that is all about decentralization has difficulty coming up with a common pricing system on which everyone can agree.

Depending on whom one asks, the price of bitcoin at any given time can be quoted within a range of hundreds of dollars. For that reason, some outlets are claiming bitcoin has already eclipsed its all-time high set three years ago, while others, including CoinDesk, are saying we’re still a ways from the mark.

That’s because much like the foreign exchange market, the cryptocurrency market isn’t centralized the way, say, the New York Stock Exchange is.

While individual crypto exchanges are called “centralized,” they are to the extent that trades take place within their platforms. In fact, they are trading the same digital assets found on other exchanges.

One could send bitcoin bought on one exchange to another and then sell it on that second exchange. That opens up arbitrage potential that helps keep prices relatively close together, though with sizable discrepancies.

Slippage, differences in liquidity and other costs help explain why prices may be so different across the board.



A portion of CryptoCompare's Bitcoin Arbitrage Table.

Source: CryptoCompare

Likewise, the historic all-time high for bitcoin is also different, depending on the source. CoinDesk’s Bitcoin Price Index uses a weighted average of prices to get a reasonable sense of where bitcoin is or was trading at any particular moment.

The average is taken from 10 leading cryptocurrency exchanges including Bitflyer, Bitstamp, Coinbase and Kraken. Were one to get a quote on bitcoin from a major exchange at any time of day, it may not be exactly at the BPI’s number but it is quite likely to be very close. Nonetheless, volatile markets can produce the occasional outliers.



BTC-USD Daily Highs on Bitstamp, Coinbase, and Kraken (Dec. 1 - Dec. 31, 2017)

Source: Nomics

For decades, if not centuries, good old-fashioned fiat currencies have been mostly traded over the counter, first in physical marketplaces, then using telephones and computer terminals.

As in crypto, the exact price of a floating-rate fiat currency is a function of supply and demand.

Thus when futures exchanges use a reference rate to use for their forex contracts, they first decide on what sources will be used, then plug them into a formula of some kind.

In many respects, one can think of CoinDesk’s BPI as a sort of reference rate for the price of bitcoin. And for the record, CoinDesk views the all-time high of bitcoin as $19,783. We’ll let you know if and when it gets there.

Decentralized Finance or ‘DeFi’ as it is commonly called, refers to financial services that utilize technologies such as blockchain.  The recent boom behind DeFi is largely based on the same promises being made by blockchain for years now – transparency, open source, borderless, permissionless.

Some of the implementations of technology currently capturing the attention of the market include,

• Lending Platforms
• Prediction Platforms
• Decentralized Exchanges

Unfortunately, any time there is a large amount of hype around a new technology or service, there will be well-intentioned, but ill-informed market participants.  As a result of this, companies offering said services often become the victim of hacks, and thereby market participants that entrusted them with their funds.

The following are only a few of the various examples in recent months where this has occurred.

Hacks

Origin Protocol

This young company is actively building its suite of services which allow for the creation of decentralized e-commerce stores, underpinned through its stablecoin OUSD.Origin Protocol has just announced on November 17th, that it has become the latest DeFi project to be the victim of a hack – which has resulted in the loss of at least $7 million USD.“OUSD has been hacked, and there has been a loss of user funds. We are actively investigating the issue.

We are committed to making things right.”

Akropolis

Lending/borrowing, savings accounts, and customizable decentralized autonomous organizations (DAO) – each of these are financial services offered by a company known as Akropolis.On November 12th, Akropolis suffered a theft amounting to roughly $2 million USD.

“At ~14:36 GMT we noticed a discrepancy in the APYs of our stablecoin pools and identified that ~2.0mn DAI had been drained out of the yCurve and sUSD pools…These pools had been audited by two independent firms, however, the attack vectors used in the exploit were not identified in either audit.

The essence of the exploit in question is a combination of a re-entrancy attack with dYdX flash loan origination.”

Value Protocol

While its services are various, Value Protocol is most known for its ‘Value Vaults’, which act as a yield-farming aggregator.On Nov. 14th, Value Protocol was the victim of yet another attack, resulting in the loss of user funds.

“On Nov 14th 2020 at 03:36:30 PM UTC, a hacker performed a flash-loan exploit on the MultiStables vault of ValueDeFi protocol, which resulted in a net loss of roughly 6mil$.”

Method of Attack

Interestingly, in each of the cases above, a similar method of attack was used.  Known as a ‘flash-loan’, hackers would take out significant loans in a particular asset, large enough to swing its market price.  The attacker would then use the funds from the loan to re-purchase the asset at devalued prices.  Upon doing so, the attacker will pay back the original loan, netting a significant profit.

Mixed Reception

Due to the issues surrounding DeFi, figure heads within the industry appear split on whether the potential of DeFi is real, and/or enough to overcome the potential bubble which has formed.Binance CEO, Changpeng Zhao, maintains a positive attitude, stating,“I think some of the pro-innovations will remain.

The liquidity providers, “profitable farming,” now provide a high annual percentage of income. It may not last very long…Companies create new tokens, issue them as a reward. This is not a long-running story. But I think DeFi is here to stay.

Even now, with Bitcoin’s popularity rising again, DeFi is still popular. We think there is a lot of growth potential in DeFi.”Economist, Nouriel Roubini, who is notoriously ‘anti-blockchain’, has taken a differing stance, likening DeFi to vapourware.“DeFi was vaporware from its onset.  Now totally faltering as blockchain was always the most over-hyped technology in human history.”

A Dangerous Place to Be

If the message from the aforementioned examples isn’t clear yet, it is this – DeFi is a dangerous place to be right now.  The amount of hype surrounding what often amounts to simply a ‘buzzword’, has resulted in a growing amount of hacks.

Combined with the rapid growth of DeFi and these hacks, the sector is unsettlingly reminiscent of the 2017 ICO boom, in which markets were flooded with similar issues. 

While DeFi may hold limitless potential for the way we view finance, be careful when jumping into the fray.If the money lost through hacks isn’t scary enough, maybe the growing number of scams will be to ward of uneducated investors.

For a more detailed look at what DeFi is, and what it has to offer, make sure to peruse our ‘DeFi 101’ article HERE.

Institutional adoption of bitcoin is here, you just have to know where to look. While cryptocurrency advocates have long worked to build an ecosystem deemed credible enough for more than just mom and pop investors, nearly 20 institutions already filed paperwork with the U.S.

Securities and Exchange Commission last quarter, showing they invested in the Grayscale Bitcoin Trust (GBTC), a product of Barry Silbert’s New York-based Grayscale Investments, LLC.

While many of the names are well-known mutual funds like Ark Invest with $4.5 billion in assets under management and Horizon Kinetic, managing $5.3 billion, according to their investor disclosure forms, the latest filings are also rife with relative newbies to the space including Rothschild Investment Corporation, Addison Capital and Corriente Advisor.

“It's very difficult to have a clean one-to-one signal on who's entering and exiting the space,” says Ark Invest crypto analyst Yassine Elmandjra. “But there are some very interesting proxies that can gauge institutional interest.”

The problem is, the vast majority of the institutional investors who filed the paperwork, called a 13F filing, will no longer need to do so if the SEC gets its way and raises the threshold to report from $100 million to $3.5 billion.

Though bitcoin represents only a tiny fraction of the total assets that will no longer have to be disclosed if the change is implemented, the nascent industry stands to be disproportionately impacted.Of the 27 GBTC disclosures Forbes found only nine were more than the new $3.5 billion projection.

Only three companies managed those nine funds, meaning much of the diversity of the space, the smaller institutional investors who are just starting to experiment with the new asset, would disappear.

The changes are bad timing for the nascent bitcoin industry, which is just now starting to see broad institutional interest in the asset that many see as a hedge against more traditional investments, and a possible safe haven for investors as central banks around the world seem to be printing endless amounts of money.

But as often happens in crypto, every one step back the industry takes, there’s two steps forward. In January, the same Grayscale Bitcoin Trust whose clients had already been filing 13Fs became an SEC reporting company, making it the first bitcoin firm to file quarterly 10-Qs and annual 10-Ks with the regulator, shedding new light on the internal structure of institutional bitcoin adoption.

Today, Grayscale took it up a notch, starting the same process with the SEC for its second crypto fund, the Grayscale Ethereum Trust (ETHE), and revealing exclusively to Forbes its plans to turn each of its 10 products—also including XRP, stellar lumens, ethereum classic, litecoin, zcash, bitcoin cash, zen, and a fund for large cap cryptocurrencies—into SEC reporting companies.

“The model we have is working,” says Grayscale managing director Michael Sonnenshein, 34. “It also continues to hold our team to an even higher standard in how we operate our business and how we diligence our partners and can really serve as a model for other asset managers.

” There’ll be a 60-day comment period starting today, before, the trust could also start filing its 10-Ks. If all goes as planned, Grayscale will next work to convert all ten of its cryptocurrency investment vehicles into publicly traded assets, then turn each of those into SEC reporting companies. 

The price of bitcoin has increased by 56% since January, according to cryptocurrency data site Messari, reaching its high for the year, $11,809, earlier this month before dropping slightly to $11,657 at the time of publication.

The most recent Grayscale quarterly report saw the trust growing at a rate of $57.8 million a week, reaching a record $751.1 million in the quarter. As of yesterday, assets in GBTC totaled $4.5 billion and Grayscale’s total assets under management have increased 37.5% since the June report to $5.5 billion today.

Due to the dearth of publicly traded investment opportunities for bitcoin, investments in GBTC can serve as a useful proxy for institutional interest in crypto-assets. But it is far from a perfect metric.

The highly private New York private equity giant Fortress Investment Group has $41 billion in assets under management for 1,700 institutional investors, and earlier this year offered to buy out the creditor claims in the now defunct MtGox bitcoin exchange. $30 billion pension and endowment advisor Cambridge Associates, has been advocating for its clients to invest in bitcoin since at least 2019. 

Famed Hedge Funders Mark Yusko and Mike Novogratz serve institutional bitcoin investors at their firms, Morgan Creek and Galaxy Digital, respectively, and Forbes 30 Under 30 member Hunter Horsley founded Bitwise Asset Management to serve institutional investors.

In May Canadian firm 3iQ started trading a bitcoin fund on the Toronto Stock Exchange, joining London-based Coinshares and Switzerland-based Amun, which offer exchange-traded notes similar to Grayscale’s products in other jurisdictions.

The massive inflow of funds to Grayscale sister company Genesis Capital, which added over $2.2B in new loan originations in Q2, is also evidence of institutional interest. But for the most part, the clients of these firms remain incredibly private, making the soon-to-be changed 13F reports on GBTC investment activity a crucial source of investor data.

Earlier this year U.S. attorney general William Barr announced that President Trump intended to nominate SEC Chairman Jay Clayton as the next U.S. attorney for the influential southern district of New York. One of the last things Clayton did as he prepared to step down as the nation’s top regulator was publish a plan that would raise the minimum assets.

 “You lose a lot of transparency in the market,” says Daniel Collins, founder of WhaleWisdom, a data provider that specializes in analyzing 13F forms. “That's why people look to the U.S. market, to establish confidence in the market for potential investors, foreign investors. And all of a sudden you're hiding all these assets every quarter that used to be disclosed.

”The SEC adopted the 13F form in 1978 as a way to track the investment behaviors of America’s largest investors. At the time, the value of U.S. public corporate equities was $1.1 trillion, according to an SEC statement, and the minimum size of a company deemed influential enough to track was $100 million.

 Between then and the announcement of the proposed changes earlier this year, the total number of those equities grew to about $35 trillion. The proposed $3.5 billion minimum is designed to be proportionately the same to the total public corporate equities as when the form was first adopted.

Clayton was nominated by Trump to be chairman of the SEC in January 2017 and is known in the cryptocurrency community for cracking down on several initial coin offerings (ICOs) where tokens issued on a blockchain were sold in a manner similar to traditional securities.

Given Trump’s cozy relationships with private companies, it’s perhaps no surprise that the presumptive nominee to be U.S. attorney for the Southern District of New York would seek to make such a business-friendly change to regulation on his way out.

However, retail investors stand to lose a lot of valuable data as 5,200 13F filers last quarter are reduced to an estimated 500 if the regulatory change goes into effect, according to Collins.

“You're looking at $2.3 trillion in assets, no longer being disclosed,” he says.

Summary

The rise of bitcoin is textbook supply and demand. Since supply is fixed and more and more institutional investors and end-users are adopting bitcoin, the price has surged.

The positive feedback loop with bitcoin appears to be getting stronger over time as adoption increases. The theoretical justification for this is known as Metcalfe's Law.

With much of the world's population under the thumb of authoritarian governments, demand for bitcoin will only grow.With commodities like oil, when prices rise, producers can increase production and therefore increase supply. This causes their prices to revert to the mean.

This effect is absent in bitcoin.In the 1970s and early 1980s, a young entrepreneur named Robert Metcalfe (pictured below) proposed that a simple equation would be responsible for explosive growth in the value of technology.

You may not have heard of him before reading this, but he's best known for inventing the Ethernet cable. Today, he's a venture capitalist and a professor at


the University of Texas

.

Metcalfe theorized that the value of a network is roughly proportional to the square of the number of users who adopt it. To give an example, if you were the only person in the world with a smartphone, it wouldn't be super useful because you couldn't reach anyone.

However, as the adoption of smartphones grew over time, the value of the network grew proportionally. Today, the world's most valuable company, Apple (AAPL) has ridden this exact wave. Much of the explosive growth of technology companies can be attributed to so-called network effects, where every new person who joins a network makes the network more valuable.

Network effects made young geeks far richer far faster than the titans of industry before them. Network effects apply in many areas where people don't expect them.

 They apply socially, as friends introduce friends, bringing opportunities for business (and romance). This is where the term networking came from. Network effects allow places like Harvard (from where Metcalfe got his Ph.D.) to charge more than the average person makes in a year for tuition, room, and board. The English language itself benefits from a network effect.

Nowhere are network effects more apparent, however, than in cryptocurrency. With Bitcoin (BTC-USD) being the dominant cryptocurrency, it's the most likely to benefit. Research has shown that much of the increase in the value of bitcoin can be attributed to network effects.

The first commercial transaction of bitcoin apparently was by software developer Laszlo Hanyecz, who traded 10,000 BTC for a pizza. Back then, there were few takers for bitcoin, so the trade may have seemed rational at the time until you realize that he may have inadvertently tipped his pizza guy over $100 million US dollars in today's BTC.

The same could be said for the ne'er-do-wells in my high school who also were early adopters of bitcoin, who along similar lines, accidentally traded hundreds of thousands of dollars in today's bitcoin in the early 2010s for psilocybin mushrooms and pot.


Data by YCharts

Does Metcalfe's Law Apply to Bitcoin?

Bob Metcalfe has made some crazy predictions in his life, some have come true, and some haven't. He famously ate a piece of paper with his words on it after making a wrong prediction in the 1990s. Metcalfe's Law has been criticized as being too simplistic.

The most valid criticism is if the value of a network doesn't increase by the square of the number of users, but rather increases by a logarithm. This is probably true to some extent.

 If I and someone in China are part of the same network we're not super likely to transact in bitcoin, so the value increase is likely somewhat lower than if my neighbor down the street adopts bitcoin for part of his savings.

It is clear that the value of the network grows exponentially though when new users join. Researchers have made a strong case that the present value of Facebook (FB) was built this way.Bitcoin is also used as much or more as a store of value than a medium of exchange. PayPal (PYPL) is expanding its cryptocurrency offerings, which will bring far more interest in the currency, driving the value up and the volatility down over time.

Still, as institutional investors legitimize and adopt bitcoin, the demand for BTC is bound to increase over time. In short, more people are adopting bitcoin, and the supply is not increasing as fast as demand, causing the price to skyrocket.

Supply and Demand

In 2017, I thought bitcoin was severely overvalued. I was initially right, as I watched it zoom up to $20,000, then promptly deflate over 80 percent. Slowly, I changed my mind as the bubble faded and the process of price discovery continued.

What really changed my opinion was the pandemic, when governments around the world printed money like there was no tomorrow in order to keep everyone's bills paid. I wrote about this in June. It may not immediately be obvious, but printing money is a form of taxation, and owning bitcoin means that you're not subject to taxation via money printing.

Since printing money is quicker, more effective at raising revenue, and less likely to cause politicians to not be reelected, it's almost always going to be the way out for over-indebted governments.If you take the Fed at their word with their 2 percent inflation target, you can expect the value of the dollar to go down (.98^10) over the next 10 years.

That's a roughly 18.3 percent decrease in your purchasing power by 2030. That's because the Fed is always printing more money to keep the economy humming along and to force people to invest.

The supply of bitcoin, however, is relatively fixed. Moreover, adoption by institutional investors is rising, and billions of people still live under oppressive governments that confiscate wealth in far less subtle ways than running benign amounts of yearly inflation.

If you're reading this from your home office in a comfy suburb in the United States, the dollar may serve your interests just fine. Bitcoin is a real boon for the global middle class and a problem for authoritarian third-world governments, however, when they lose the ability to keep their people down.Look at crypto adoption for selected countries.




Source: Statista


I think that it's not a stretch to assume that bitcoin adoption could at least double within the next few years. If you take Metcalfe's initial law to heart, that's about a 4x increase in the value of bitcoin or a little over $1 trillion in market cap. Gold is around $9 trillion.

If you think the network value is lower, then bitcoin could still double or triple in fundamental value.Unlike commodities like oil, where when the price rises everyone pumps like crazy to make money, bitcoin has a fairly limited supply, setting the stage for a large increase in the value of bitcoin in the 2020s.

Good things are more likely than not to happen to those who allocate a small part of their portfolio to bitcoin. Citibank just put a $300,000 price target on bitcoin. Is it a bit hyperbolic? Sure, but they based the target on how gold has performed since the US fully came off the gold standard in the 1970s.

Conclusion

Bitcoin is a wickedly volatile asset. Therefore, if you invest in it, normal guidelines for investing in volatile assets apply, such as dollar-cost averaging on entry and exit to smooth out your results. Another nice risk parity trick is weighting positions negatively proportional to their volatility, meaning that instead of budgeting a dollar amount to your positions, you budget a certain amount of risk.

There are different ways to execute this, but the simplest is to allocate a small portion of your portfolio, like 5-6 percent to bitcoin.

Alternately, the accumulation of bitcoin in small frequent quantities makes a lot of sense to me. I still like gold as well, but every time a big-name investor or company endorses bitcoin, the fundamental value increases a bit.

And if the SEC allows a bitcoin ETF, those who buy now will benefit from a persistent boost in demand. So there you have it, the bitcoin bulls have won me over. Common sense still applies to risk management and sizing positions, but I'm a believer now.

Bitcoin (BTC) hitting its all-time highs of $20,000 again is not the end but the start of its explosion to a $1 trillion asset, a senior Bloomberg analyst said.In a tweet on Monday, as BTC/USD reclaimed $16,000, Mike McGlone, senior commodity strategist at Bloomberg Intelligence, delivered a fresh bullish forecast for the largest cryptocurrency.

Bloomberg Intelligence: BTC will keep rising in 2021

Bitcoin saw lower levels over the weekend, briefly dipping to $15,800 before conspicuously rising on Monday to see highs of $16,400 at press time.“$20,000 #Bitcoin Is Primary Hurdle Toward $1 Trillion Market Cap — The digital version of #gold but with more-limited supply and a history of adding zeros, appears to be in an early price-discovery stage and may simply continue its ascent in 2021,” McGlone wrote.

“Mainstream adoption is rising.”

Bitcoin market cap vs. price historical chart. Source: Mike McGlone/ TwitterAn accompanying chart described a $1 trillion market capitalization as the “next big resistance” for Bitcoin.McGlone is known for his increasingly positive Bitcoin outlooks. 

As Cointelegraph reported, he argued in September that Bitcoin should, in fact, trade at $15,000 based on active addresses, something which soon became reality.

Brandt signals bull run still in early stages

McGlone is far from the only markets veteran doubling down on the lucrative prospects for Bitcoin in its current bull run.On Monday, trader Peter Brandt suggested that based on previous bull runs from 2013 and 2017, the current price performance was only the start of the cycle.

“During the 2015–2017 bull market in Bitcoin $BTC, there were 9 significant corrections with the following averages: 37% decline from high to low, 14 weeks from one ATH to the next ATH,” he explained.

“Since the early Sep low there have been two 10% corrections.”

Peter Brandt’s highlighted Bitcoin bull run characteristics chart. Source: Peter Brandt/ TwitterStatistician Willy Woo likewise believes that there is far more mileage left in the current uptrend. His argument was based on Bitcoin’s relative strength index (RSI), which he described as “just warming up.

”Beyond Bitcoin circles, a Citibank market analyst this week announced that he foresaw a $318,000 Bitcoin price by December next year. 

• Bitcoin is nowhere near ready to become the world's default digital payment option.
• An enormous backlog would result if the 700 billion digital transactions a year that take place globally were processed on-chain.
• Several possible scaling solutions are in the works, with the pace of development is slow—but steady.

For the world’s leading cryptocurrency, mass adoption as a form of electronic cash was the original goal. But these days, while Bitcoin’s price has increased, people are more likely to treat it as a store of value.

And while we’re seeing a boom in non-cash transactions, merchant payments made in Bitcoin are down. Many users have concluded that it has drawbacks as a way of making purchases, being slower and more expensive (at least for smaller transactions) than traditional cash.

That may not always be the case, though. Some devotees are determined to reach a state where almost all the world’s digital transactions are made in Bitcoin; where crypto wallets are routinely used to buy anything from a lemon to a Lamborghini, and where transactions are quick, and fees are low. 

So what, technically, needs to happen for Bitcoin to reach the stage where it’s the predominant currency for peer-to-peer payments around the world? 

The opportunity

In 2019, approximately 708.5 billion digital transactions were made annually. That amounts to 1.9 billion transactions a day. 




Worldwide non-cash transactions (in billions), by region, 2014–2019. Image: Cap GeminiTo deal with all of these, the Bitcoin blockchain would need to process 13,194,444 transactions every 10 minutes—the rate at which blocks are processed.

To process 13,194,444 transactions every 10 minutes, with a Bitcoin transaction size currently averaging 537 bytes, each block would need to hold just over 7GB of data. 




The size of Bitcoin transactions. Image: Bitcoin Visuals.With the entire Bitcoin blockchain totaling just over 300GB as of September 2020, that would be equivalent to adding the entire current Bitcoin blockchain every 43 days. This transaction volume would generate just over a terabyte of data added to the blockchain every day, or 372 terabytes a year.

The reality

Currently, there’s no way technically to achieve that. Bitcoin’s block size is fixed at 1MB (it can be exceeded— but only slightly.) And since block time and size are fixed, 13,914,444 transactions would be impossible to process in ten minutes, creating a huge backlog (or mempool, in blockchain parlance.) How big would the mempool be? Having exhausted our own math, Decrypt asked Jason Deane, an analyst at Quantum Economics.


He told us that, based on historical data, the network can manage around 3,333 transactions per 10 min block— that’s roughly 5.5 per second (TPS). For comparison, Visa can process something like 1,700 TPS. But Bitcoin’s tech is still nascent, and 13,914,444 transactions would take 4174.5 blocks and roughly 29 days to clear. 

“And that's only one block of data we should be clearing in 10 minutes!” said Deane, who added that the network would back up exponentially. “By the time we completed that batch of transactions, there would also be another 13, 914,444x4,175 transactions to clear or 580,092,803,700 in total.”

Increasing Bitcoin’s block size

To cope with a couple of billion daily transactions on the blockchain itself, Bitcoin would need “a network, hardware, and transfer speeds far in excess to what we have now,” said Deane—and for that reason, solutions based on off-chain transactions, such as “sidechains” exist.


“Even if you somehow created a scenario where a 7GB block would work, I’d argue the tech isn't up to it, and there are too many negative implications for that to be desirable,” he added. One is the argument that it’s impossible to continue to increase the block size indefinitely, and that it will lead to greater centralization.

If node operators need to download blocks on the scale of gigabytes, and can’t afford the hardware or Internet costs associated, that could be a roadblock for many. Increased centralization would be a consequence.


Then there are the storage costs of data and the bandwidth for transmitting it all to take into account. “There’s an inherent tradeoff between scale and decentralization when you talk about transactions on the network,” said Bitcoin Core developer Gregory Maxwell in 2014. “You’d need a lot of bandwidth, on the order of a gigabit connection. It would work.

 The problem is that it wouldn’t be very decentralized, because who is going to run a node?

”But plenty of people argue that increasing block size is key to bringing Bitcoin into mainstream adoption, particularly as other solutions are still a work in progress. It would allow more transactions to be confirmed in each block, and lower fees, making the network faster and cheaper.

It’s what the Bitcoin Cash community did, when they forked from Bitcoin core, changing the block size first to 8 MB, and later to 32 MB. But given that, in practice, the average block on the Bitcoin Cash network is still under 1 MB,  the debate on block size—which has raged on for many years—remains unresolved. Instead, other solutions have gained prominence. 

Shrinking the amount of data used in each transaction

This would mean more transactions can fit into a block, and is akin to what Bitcoin achieved with its 2017 Segregated Witness update, known as SegWit, which improved overall network capacity.




Payments made using SegWit. Image: Transactionfee.infoSegWit allows Bitcoin blocks, to expand, if necessary, from 1MB to 4 MB, increasing the number of transactions that can be processed per second by the network. That means fees are lower, too, and SegWit is now reaching over 60% of Bitcoin transactions. 

The Lightning Network

So-called “second-layer solutions” sit on top of the Bitcoin blockchain. The best-known is the Lightning Network. It works by allowing nodes to open up channels, and transact between themselves, transmitting the final tally to be recorded on the Bitcoin blockchain, and making for a—potentially—faster, cheaper payment system. 


Lightning is still a work in progress, with technical issues that need to be ironed out, but developers are making headway, and new features and improvements are constantly emerging. 

Sidechains

Sidechains are blockchains that branch off the Bitcoin blockchain and are able to move assets between themselves, freeing up bandwidth for things that need to be settled on the main chain. Blockstream’s Liquid Network is an example. The downside is that each sidechain needs to be secured by nodes, which can lead to issues with trust and security.

Sharding 

Sharding is one of the most popular methods employed by other blockchains to ensure scalability—it’s one of the key features of the impending Ethereum 2.0 upgrade, for example.

It involves breaking transactions up into “shards,” with nodes effectively performing parallel processing to speed up the system, enabling speeds of 100,000 transactions per second (as Ethereum 2.0 hopes to demonstrate).

But the process adds complexity and may be detrimental for security because sharding could increase the chances of a “double-spend” as a result of an attack.

Both because of the technical challenges involved, and the general reluctance of Bitcoin devs to plunge into uncharted waters, it’s unlikely that sharding will be developed as a scalability solution for Bitcoin any time soon.

A measured approach

Bitcoin’s limitations are plain for all to see. The prospect of the blockchain processing 700 billion transactions, annually, is nowhere near a reality. Scaling solutions, like sidechains and the Lightning Network, are helping, but there are drawbacks, and there isn’t necessarily a clear, winning approach. 

Ultimately, ensuring the Bitcoin blockchain’s security remains a priority, and more than one solution could end up being used in tandem. Quantum computing could play a part too. 

Meanwhile, experimentation continues every day, with developers getting ever closer to improving Bitcoin’s scalability. Just don’t expect it to be too soon.

The global nature of the blockchain ecosystem is adding a layer of complexity in the fight against crypto-related crimes. Against this backdrop, the US Department of Justice (DOJ) is calling for international, federal, state and public-private cooperation to improve the regulation and policing of cryptocurrency activity.

On October 8, 2020, the US Attorney General’s Cyber-Digital Task Force released a new report addressing the emerging threats and enforcement challenges associated with cryptocurrencies.In the Cryptocurrency Enforcement Framework, the task force says that while it recognizes the “breathtaking possibilities [of distributed ledger technology] for human flourishing,” citing areas including supply chain transparency and central bank digital currency (CBDC), the technology also “plays a role in many of the most significant criminal and national security threats our nation faces.

”While crime has been expanding beyond national borders for years, blockchain and cryptocurrencies have taken this globalization to another level, allowing parties to conduct transactions and transfers between continents in a matter of minutes. In addition to this, some of the largest crypto exchanges are based overseas and conduct very limited customer due diligence.

Finally, the emergence decentralized platforms, peer-to-peer exchangers, and anonymity-enhanced cryptocurrencies is further obscuring financial transactions.In light of this, the DOJ says that “for cryptocurrency to realize its truly transformative potential,” national, federal and state governments, as well as stakeholders, must take coordinated active to mitigate harmful uses of the technology.

The DOJ “[recognizes] the importance of working with interagency and international partners to enhance an already vigorous enforcement plan, regulatory scheme, and policy framework to thwart the opportunities created by cryptocurrency for criminals, terrorists, and other bad actors,” the report says.

“The department is committed to strengthening its key partnerships by promoting law enforcement awareness and expertise; by fostering cooperation with state authorities; by enhancing international cooperation; by promoting comprehensive, consistent international regulation; and by conducting private sector education and outreach.”

Illicit uses of cryptocurrencies

The framework identifies three main types of criminal behavior that exploit the unique features of cryptocurrencies and the cryptocurrency marketplace.To begin with, it cites the use of cryptocurrencies to engage in financial transactions associated with the commission of crimes, such as buying and selling drugs or weapons on the dark web, engaging in extortion schemes, leasing servers to commit cybercrimes, or soliciting funds to support terrorist activity.


Anatomy of the DeepDotWeb Criminal Operation, Cryptocurrency Enforcement Framework

Most recently, the FBI observed an increase in cryptocurrency fraud schemes due to COVID-19. Fraudsters have been leveraging the fear and uncertainty cause by the pandemic to carry out scams in new ways, such as threatening to infect victims and their families with COVID-19 unless they send payment in bitcoin.

The second category involves the use of cryptocurrencies to engage in money laundering or shield otherwise legitimate activity from tax, reporting, or other legal requirements.Infamous cryptocurrency trading platform BTC-e was one of the world’s major bitcoin exchanges before the US government seized the website and arrested staff members in 2017.

According to the indictment, BTC-e facilitated transactions for cybercriminals worldwide and received criminal proceeds from numerous computer intrusions and hacking incidents, ransomware scams, identity theft schemes, corrupt public officials, and narcotics distribution rings.

Finally, the third category relates to crimes implicating the cryptocurrency marketplace itself, such as stealing cryptocurrency from exchanges through hacking or using the promise of cryptocurrency to defraud unwitting investors.In 2019, over US$4.5 billion of cryptocurrency was lost to theft or fraud, more than doubling the losses from the prior year, according to crypto intelligence company CipherTrace.

The first five months of 2020 saw crypto thefts, hacks, and frauds totaling US$1.4 billion, suggesting that 2020 could see the second-highest value in crypto crimes ever recorded.

Established in early 2018, the Cyber-Digital Task Force consists of officials in the DOJ’s Criminal Division, National Security Division, Office of Legal Policy, and the FBI. It was formed to study how the DOJ responds to cyber threats and make recommendations to curb those threats.

• Crypto fantasy soccer game Sorare has added FC Bayern Munich.
• Sorare players can buy and sell NFT-based digital cards of the team’s players.
• Sorare has 100+ licensed teams and reported $1M+ in October sales volume.

Reigning Champions League and Bundesliga champion FC Bayern Munich is the latest professional soccer team added to Sorare, the surging Ethereum blockchain-driven fantasy soccer game that now has more than 100 licensed teams onboard.

Starting today, Sorare players can buy and sell digital cards based on top FC Bayern Munich players like Manuel Neuer and Thomas Müller as well as use them in their in-game lineups.

Sorare lets players amass cards—which are unique, non-fungible tokens (NFTs)—from across all licensed teams and leagues, earning points based on each player’s respective real-world performance in competition that week.

FC Bayern Munich is another high-profile addition for Sorare, which has thus far added teams such as their Champions League final opponent Paris Saint-Germain along with Juventus, Atletico de Madrid, and dozens more.

Sorare also has agreements with Japan’s J.League as well as the United States’ Major League Soccer (MLS) Players Association.But as the best club team in Europe—and likely the world—Bayern Munich is the biggest score yet for Sorare.

“Sorare is a unique gaming platform that blends two strong trends in sports licensing: fantasy football and digital collectibles,” Benjamin Steen, FC Bayern Munich’s Head of Customer Care, Digital Licencing & Stadium, told Decrypt. “With a young, growing, and international user base, it was obvious for a club like FC Bayern Munich to be present alongside this fantastic blockchain game.

”Alongside this latest team license acquisition, Sorare also shared updated figures that suggest continued growth for the Ethereum-based experience. According to the company, more than $1 million worth of cards were sold on the platform in October alone, with the total since December 2019’s beta launch now above $3.7 million.

The Sorare platform now has 45,000 users around the world.In late September, Sorare announced that it was beginning a larger United States push for the game, which already counted the US as its second-largest market. The company also plans to seek further US licenses following the June announcement of the MLSPA agreement.

In July, the company announced an oversubscribed $4 million seed round that included participation from former German club player and World Cup champion André Schürrle.
Whether it’s in Europe, America, Asia, or beyond, Sorare CEO Nicolas Julia suggests that Sorare is an ideal way to introduce FC Bayern Munich’s more than 100 million supporters worldwide to Ethereum and the benefits of crypto-infused gaming.

“In the summer of 2018, my co-founder Adrien [Montfort] and I decided to leave our company to pursue our deeper internal drive: bring a crypto product into the hands of millions of people,” said Julia.

 “We were fascinated by the emergence of non-fungible tokens and were convinced they will drive the next wave of consumer adoption.”Given the platform’s recent growth, they may just be right.

Cryptocurrency might be a perfect addition to a financial service practice, if you’re trying to grow and maintain your business.Why would I say this when we know that most advisers would never tell their clients to allocate more than 5% of their portfolio to cryptocurrencies?

Adam Blumberg is a Certified Financial Planner, and has been in financial services for 12 years. He is also co-founder and chief educator for Interaxis, a company trying to bridge the education gap between digital assets and traditional finance. He will join CoinDesk's Bitcoin for Advisors conference on Nov. 9-10 to explore the benefits of digital assets. 

The answer is in the demographics and the investment habits, styles, needs and goals of those that do and might find crypto appealing. Gen X and millennials have lived with the internet most or all of their adult lives. They have become used to having all their services on-demand and having the ability to fact- and price-check everything.

Price checking became the norm with financial advisers over a decade ago, leading to the rise of  robo-advisers. I was early in my FA career when Betterment and Wealthfront launched, and I saw the appeal.

I already had clients asking me about my fees and how they were justified given the returns.  Other advisers just kept telling themselves – and each other – they couldn’t be replaced by a computer. “Our jobs are too important.

” And now, advisers are similarly gun-shy about crypto, at risk of missing the industry’s next disruptive trend. 

Robo-advisers currently have over $100 billion in assets under management (AUM), and the average age of the investors is well under 40. Those investors didn’t see the need to pay over 1% to financial advisers who did little more than pass the investing function on to third parties, who charged additional fees, only to underperform the market.

THE STORIES ARE THERE FOR ADVISERS TO TELL THEIR CLIENTS AND INFRASTRUCTURE IS BEING BUILT TO HELP MAKE CRYPTO A SMART PLAY IN FINANCIAL PLANNING.

In addition, we have seen the growth of Robinhood, where 80% of the users are millennials, as well as apps like Acorns and Stash that offer a digital-first and highly customizable experience.

The moral here is, if Gen X and millennial investors want a certain way to invest, save or transact, they’re going to find it and they’re going to help dictate the fees and services.

It’s likely crypto represents the next frontier of investing.Let’s look at that group’s attitudes toward investing. According to CB Insights, 33% of millenials don’t think they’ll need a bank at all, and 83% express openness to alternative investment strategies.

Currently, the age group with the largest number of bitcoin investors is the 25-34 group, according to Grayscale (like CoinDesk, a unit of Digital Currency Group). However, the average age for those that are interested in bitcoin is 42, or those that are in their peak and growing earning years!

Read more: More Than Half of Financial Advisors Want Better Regulation Before Investing in Crypto

Couple those statistics with the fact that this group stands to inherit over $60 trillion in the next three decades and are charted to  quintuple their wealth by 2030.

What you have is a group of smart investors with growing incomes and wealth who know what they want to invest in and are wary of paying extra fees.Crypto gives financial advisors the ability to offer something to those younger investors that many advisors can’t or won’t talk about.

 Clients want it, and they want help from their advisor. More than half of those surveyed by Grayscale said they would be more motivated to invest in bitcoin if their adviser recommends it.

Crypto can fit in with changing fee structures and service offerings. For advisers who are offering subscription, flat-fee, hourly or project services, crypto solutions fit very nicely. 

Having conversations about where crypto makes sense, and helping clients understand, buy, safely store and account for their crypto is highly needed by retail investors.

Crypto also gives advisers the opportunity to offer alternative investments to clients that otherwise wouldn’t qualify as accredited investors. From protocol tokens to Reg A+ offerings, crypto investments can be seen as a highly liquid, low-minimum, alternative risk asset, which this generation is much more open to investing in.

While many financial planners shied away from robo-investing because of perceived dangers, it’s important to note cryptocurrencies don’t need to cut into an adviser’s revenue stream. For instance, if a financial advisor is using AUM as the main source of fees, that can be maintained either through funds on custodial platforms, or through third-party or separately managed account (SMA) services to manage clients’ crypto allocations.

Read more: Damanick Dantes – 4 Charts Showing Why Financial Advisers Should Care About Bitcoin

The main point is this highly sought-after demographic of clients is interested in alternative investments, and in crypto in particular. Being able to at least have conversations with them, understanding where it fits in a portfolio and being able to relate it to their financial lives and goals is a big step toward winning their growing business.

The ability to provide different fees and offering structures is even more important as financial services revenue models continue to change.

Bitcoin and other cryptocurrencies have had a big year in terms of recognition and adoption. Bitcoin has made significant gains compared to traditional indexes like the S&P 500, while PayPal is readying a crypto payments feature, showing that the industry is not just for dark market trades. 

The stories are there for advisers to tell their clients and infrastructure is being built to help make crypto a smart play in financial planning. It’s time for financial advisers to meet the future of digital investments.

Bitcoin is in rally mode once more.Whether it’s uncertainty from the U.S. election, the future of the pandemic or simply more investor interest, the cryptocurrency is at the highest level since January 2018.

 Bitcoin was up 3.3% at $14,463 as of 8:33 a.m. in London.The digital currency has been benefiting from high-profile investments from the likes of Square Inc. and Paul Tudor Jones. JPMorgan Chase & Co.’s JPM Coin was reportedly used to make a payment for the first time.

Proponents argue bitcoin can be a diversifier in times of uncertainty, so events like lockdowns across Europe or delays of U.S. election results could be fueling its rise.

After taking out the June 2019 highs at $13,800, the next resistance is around $20,000, Fundstrat Global Advisors LLC technical strategist Rob Sluymer said in a note last month.

The cryptocurrency world is, of course, famously volatile. Bitcoin has made parabolic runs upward before, notably December 2017 and mid-2019, before major tumbles. And many strategists and investors are skeptical.

Empire Financial Research’s Whitney Tilson said in an email Wednesday that he still regards cryptocurrencies as “a techno-libertarian pump-and-dump scheme” and recommends most investors avoid them.

Blockchain-based music-sharing and streaming platform Audius gave away 50 million of its AUDIO cryptocurrency to music fans and artists, Decrypt reported Tuesday.

What Happened: The "airdrop," as a cryptocurrency giveaway is called, was retroactively implemented on Friday and reportedly benefits 10,000 artists and fans on the Audius platform.

The airdrop would be worth about $9.59 million as of Friday's closing price, according to CoinMarketCap data. At press time on Tuesday, AUDIO tokens are trading 17.45% lower at $0.159 — perhaps an after-effect of the giveaway.

Audius offers services similar to Spotify Technologies Inc (NYSE: SPOT) and claims to fight what it describes as a broken music industry model.

The decentralized music protocol said in its whitepaper that while the music industry generated $43 billion in revenue in 2017, only 12% of it made its way to artists.

The startup has roped in talent such as musician Joel Thomas Zimmerman, also known as deadmau5, and André Allen Anjos, who goes by the stage name of RAC, according to Decrypt.

Why It Matters: AUDIO is reportedly a governance token but also allows users to listen to their artists of choice through a Discord server.

The distribution of the token was carried out unevenly and was based on a formula that factored in how much an artist was streamed along with follower count, playlist, and song favorites, as well as songs reposted, noted Decrypt.

The formula purportedly favored artists who received 90% of the tokens distributed. A total of 5% of the tokens were distributed from a supply of one billion.

Zimmerman and Anjos are both beneficiaries of the token distribution, as are some other artists, who make up the Audius team or are on board as advisors, Decrypt reported.

We’re obsessed with wanting to draw rational relationships between the price of crypto tokens and the value behind them. There is no shortage of viewpoints from analysts, entrepreneurs, developers, pundits or investors on this question. Just google “crypto tokens valuation metrics” and you will see the variety of what has been written so far on this topic.

My own last attempt was from September 2019, as I enumerated nine different variables for measuring the health of cryptocurrencies and tokens. But I didn’t profess to have cracked the code on a magical formula, or to have found the magical equation that would become the telling star for these valuations. 

William Mougayar is the author of “The Business Blockchain,” producer of the Token Summit and a venture investor and adviser.

As I lamented in 2017 in “The Darkness Side and Long Honeymoons of Token Sales,” we are in dire need of fundamental metrics that equate to how publicly traded companies are routinely valued.

By signing up, you will receive emails about CoinDesk products and you agree to our terms & conditions and privacy policy.

In public companies, analysts and investors use metrics such as revenue, net income, EBITDA (earnings before interest, taxes, depreciation and amortization), EPS (earnings per share), P/E ratio (price to earnings ratio) and sales growth in order to correlate market capitalization justifications.

For ICOs and token-based projects, what are the equivalent performance metrics?

At the end of 2017, as token users started to surpass the number of token speculators, we hoped usage activity would prevail as the mainstay of token valuations. Fast forward to today, three years later, and we find ourselves back to square one. 

Two promising blockchain metrics have struggled to assert themselves because they failed the test of time. 

See also: Nico Cordeiro – Why the Stock-to-Flow Bitcoin Valuation Model Is Wrong

First, take gas fees on the Ethereum network. As the network became more popular (a good thing) it also became slower (a bad thing), resulting in increased gas fees to run the variety of smart contracts. The interpretation of the increased gas fees became a point of contention. 

On one hand, increased gas fees count as part of “network revenue” (a good thing). But on the other hand, it also meant that each given transaction became too expensive to run on the Ethereum network (a bad thing), and that forced some use cases to consider either moving to Ethereum side chains or other chains (a bad thing for Ethereum). 

What did the ethereum token price do during this period? First it went up, then it went back down. But it was very hard to establish a real correlation via any type of equation or quantitative measure that could be followed reliably.Second, take DeFi, a sector that has an aggressive growth trajectory.

As recently as July it was commonly accepted that the DeFi Total Value Locked (TVL) was a good indicator for the valuation of the DeFi market. As TVL continued to grow, so did the total market cap of the top DeFi tokens.
 I BELIEVE WE ARE STILL IN THE ERA OF QUALITATIVE CRYPTO TOKENS VALUATION, WHERE THE PRICE OF TOKENS IS PRIMARILY DRIVEN BY SPECULATIVE PERCEPTIONS, BRAND VALUE AND CREATOR PROMISES.Then the correlation broke down.

As I wrote in CoinDesk in early September, the total DeFi market cap was hovering at $16 billion. Today, it is about $12 billion. 

One could justify this pullback by citing traditional market behavioral dynamics that typically price underlying instruments ahead of expectations but deflate themselves after the news has been made public. That is a common psychological yin and yang in markets behavior. Perhaps that was the case here. 

That said, keep in mind the DeFi “TVL-to-market cap” relationship I cited above draws on “macro” metrics based on the health of the entire segment, and that is a lot easier to quantify than trying to apply metrics to individual tokens based on their own intrinsics. Good luck in trying to translate the macro view at individual token correlation level.

See also: Ethereum Developers Weigh Gas Rule Change to Ease Fee PressureIn addition, DeFi had a peculiarly artificial reality.

The price of many tokens was often driven by automated market maker algorithms that do not factor in prior judgment or knowledge about usage metrics and, rather, derive their core from a given demand/supply dynamic curve and the presence of a variable liquidity pool. Tight liquidity/float pools create artificial price points that need to be tested over time.

This leaves me to conclude that, in the absence of correlatable metrics, we are only left with vanity metrics, or perhaps just “input-type” data points that could one day find their way into some set of correlative equations that will make sense. 

The other peculiar anomaly between traditional stocks and crypto markets is that in crypto markets the same currency that has actual (user) utility is the one that investors/speculators partake in owning. This is in contrast to stocks that are just a unit of account but cannot be used to purchase related products or services from the underlying issuer. 

See also: William Mougayar – For DeFi to Grow, CeFi Must Embrace It

You would think that this should give room for an even tighter correlation to emerge between usage and value, but that hasn’t happened yet, at least not in a way where we can start to build a body of support behind it. 

Of course, we still have hope that one day the usage of highly popular cryptocurrencies (whether via user or developer traffic) would append and dictate the actual value trajectory of the underlying token, but that day is yet to come. 

Imagine if you were mandated to pay for charging your Tesla via a fraction of a Tesla stock. In essence, you would need to keep buying Tesla stock (therefore creating demand for Tesla stock and contributing to its eventual rise) to pay for an electric charge (excluding from your own charging station at home for example). 

Of course, as the Tesla stock price goes up your actual cost for charging would go down, and that would be a good thing. If for some reason Tesla owners stopped driving their cars, the ensuing decrease in activity would result in less demand for Tesla stock/currency and its price would dwindle accordingly.

But at least there would be a real linkage between usage and demand, something that is natively intrinsic to crypto tokens. 

In the blockchain space, on-chain fees/revenue still hold a good promise for being a leading indicator of blockchain network value. Ethereum has a proposal for making the fees schedule more dynamic (EIP 1559 and Fee Structure), which promises to make payments more equitable but also potentially more difficult to correlate.

That is certainly a development area to watch.

My friend Evan Van Ness aptly called a number of chains “Zombie Chains,” based on the little number of transactions that actually pass through them. That is an example of negative metric correlation that is nonetheless logical and easy to understand or validate.

We continue to be in the early stages of finding correlation metrics between crypto tokens value and usage. 

For this reason, I believe we are still in the era of qualitative crypto tokens valuation, where the price of tokens is primarily driven by speculative perceptions, brand value and creator promises. 

Panxora Digital Ventures has launched its hybrid seed funding solution to revive the sluggish capital market for emerging Blockchain token projects. The companies’ hybrid model creates a two-stage fundraising process that bridges the gap between seed investors’ interests and token founders’ needs to produce better results.

Gavin Smith, CEO at Panxora, said:“Our hybrid offering provides blockchain project founders and investors alike with a professional solution to the challenges they face.

Investors see our hybrid methodology not only as a structure that will improve the performance of projects but a low-cost way to get involved with promising projects early so they will be well-positioned to reap subsequent rewards.

Using our hybrid approach, early-stage investors can spread their capital across more opportunities and have several different ways to generate an improved return.

”The recent downturn has produced lower returns on investment and a deteriorating risk/reward profile for Blockchain and cryptocurrency projects slowing down investors — who have become less willing to commit capital to new token projects.Investor, who expect a clear vision of how they can make a return, often seek a significant equity slice in exchange for funding.

While, at the same time, tighter legal frameworks and skyrocketing marketing costs are making token launches whether ICOs or IEOs far more expensive, increasing founders’ demand for financing.Marcie Terman, COO at Panxora, stated:

“This type of investment structure while unknown in the cryptocurrency market is common in other alternative investment classes.

This makes the hybrid investment structure not only attractive to token investors already committed to the industry, it opens the door to conventional investors who have been looking for their first or second foray into cryptocurrency, just waiting for the right deal to emerge.

”Panxora’s hybrid model resolves founders’ and investors’ demands by dividing the project funding in two and introducing investment diversification mechanisms to generate additional profit.

In the first phase, a special purpose company is formed to raise funds from accredited early-stage investors. Sixty per cent of this capital is used to finance the utility token launch where the project founders will raise the bulk of the money needed to fund the overall business project.

Thirty per cent of the capital is invested in a licensed large capital cryptocurrency hedge fund to create extra revenue streams to reward early investors for the risk they assume for their early participation.

Seed investors also receive utility tokens at private sale prices and a share in future revenue generated by the token project or in many cases an option to convert this to equity.

Panxora only offers this investment structure for projects where they are making an investment. They provide extra assurance that the project is managed in a fiscally responsible manner by ensuring that two-thirds of the funds raised during the token sale are placed in a ‘Governance Account’ held by an FCA regulated custodian KOINE.

The Governance Account funds are hedged against cryptocurrency price volatility using proven trading models and released to token founders on the achievement of specified milestones.

At the end of thirty months, the SPV is dissolved and payouts are made to seed investors including the profit and principal originally invested in the large capital cryptocurrency hedge fund. In some cases, an option to convert to an equity stake is also possible.

Panxora Digital Ventures, part of the Panxora Group enterprise provides services that professionalise and elevate the crypto ecosystem. Its offerings are built on the back of the team’s experience in technology, blockchain and traditional finance.

Its treasury risk management technology and investment proposition offer much-needed support for token projects looking for professional methods to raise funds and manage capital.

It also has a hedge fund which trades the crypto markets using proprietary AI-software open to high net worth, professional and institutional investors.

Its cryptocurrency exchange provides liquidity for token projects, and its accounting and payments software for crypto simplifies and automates the tracking and clearing of crypto transactions.

From its offices around the world, Panxora is ensuring that crypto-asset holders and token founders have the tools they need to build dynamic, professional and profitable businesses.

The bigger you are, the bigger the splash when you jump in the water. And when it comes to mainstream payments companies, there are few bigger than PayPal.

In case you’ve been totally avoiding the headlines over the past few days (and who could blame you), PayPal (NASDAQ: PYPL) this week confirmed its entry into the crypto asset industry with the announcement that it was enabling the buying, selling and holding of cryptocurrencies on its platform.

Within the next few weeks, users in the U.S. will be able to trade bitcoin (BTC), ether (ETH), litecoin (LTC) and bitcoin cash (BCH) using their PayPal accounts.

 The service will be rolled out to Venmo, a PayPal company, and to other geographical areas in the first half of next year. Users will also be able to use these cryptocurrencies to purchase goods at 26 million merchants within the PayPal network.

The market took it as good news, evidenced by the almost 15% increase in the BTC price (at time of writing) since the announcement was made. The other cryptocurrencies supported by PayPal also saw weekly returns of 10-15%.




A cheerful rally is generally good news, and this one seems to have energized a market that had been slipping into sentiment doldrums. Indeed, the PayPal news is positive for the industry as a whole. But the news is not the boost to the fundamental outlook for bitcoin and peers that many market observers seem to think. 

Looking beyond the numbers

First, the news is not a surprise. We reported on this a few months ago, later adding that the actual cryptocurrency trading would be handled by Paxos.

By signing up, you will receive emails about CoinDesk products and you agree to our terms & conditions and privacy policy.

What’s more, the details that have been added to our reporting are disappointing. 

PayPal does bring over 340 million users to the crypto table. For context, Bitcoin currently has 32 million non-zero addresses (only 5 million of which are active), according to data firm Glassnode. 

But PayPal’s crypto users would not necessarily add to the address count, as they would not have access to their own private keys. What’s more, users will not be able to transfer their crypto holdings out of their PayPal account, nor will they be able to send crypto to other PayPal users.

 In other words, PayPal more or less dictates what users can do with their cryptocurrencies, and could presumably freeze accounts if they see fit, at least for now – not exactly in line with the industry’s origin and ethos.   

Another aspect that has many excited is the network of 26 million merchants at which users will be able to spend their cryptocurrencies, with PayPal handling the fiat-crypto conversion. Over the years, however, the “buying stuff with crypto” use case has attracted relatively little attention, as the investment use case became more predominant. 

Why would people spend an investment asset, forgoing any potential gain? True, in some countries it might be easier to pay via PayPal using bitcoin, for instance, than dollars.

But just because the service is now available does not mean that people will use it in significant numbers.  

Got the blues

On top of the disappointing details, the rally burst into life amid relatively bearish sentiment. For context, it helps to compare this week’s rally with the sharp price spike at the end of July of this year, when BTC rose almost 30% over 10 days. 

In the weeks prior to the July rally, the transaction count on the Bitcoin network had been rising, indicating growing activity. In the weeks preceding this rally, the transaction count was sloping down.




In a similar vein, the number of active addresses on the Bitcoin network was increasing into the July rally, but was decreasing at the time of this week’s jump.




Both metrics hint at declining network activity, perhaps a result of dwindling trader and investor interest given the relatively narrow band in which the price had been hovering.

The derivatives markets also indicated some bearish sentiment, with the funding rate for bitcoin perpetual futures turning negative at the beginning of September.

 A negative funding rate implies more short positions than long ones. In contrast, the funding rate had been mostly positive since early summer when the July rally began, indicating a more positive outlook for the market on the part of traders and investors. 

Tailwinds accumulating

However, crypto markets react quickly, and the above metrics are adjusting as we speak. As we have seen, sentiment can turn on a dime, totally changing market indicators in a FOMO-fueled frenzy of catching up.

The different “mood” heading into this rally could in part explain the rapid rise of asset prices as traders caught unawares scrambled to adjust positions. It could also mean that the rally could be short-lived, as the PayPal novelty wears off and the bearish sentiment returns. 

The nature of the bearish sentiment, though, and the bigger implications of PayPal’s announcement, indicate otherwise.

The waning interest of the past few weeks seems to have been more a result of boring price action than negative fundamentals. Indeed, the case for investment in bitcoin has been gaining momentum with inflation concerns encouraging not just traditional fund managers but also corporate treasurers to hedge against fiat debasement. 

In the derivatives markets, institutional activity has been steadily building. The Chicago Mercantile Exchange (CME), the largest U.S.-regulated crypto derivatives venue and often taken as a proxy for institutional involvement, now boasts the second-highest amount of open interest in BTC futures in the market – just three months ago, it was fourth.



And the number of non-zero addresses on the Bitcoin network, an indicator of adoption, continues to reach all-time highs.

Now the important part

Perhaps even more significant than these and other market indicators that point to a quiet accumulation of interest is the message that the PayPal news sends.

It’s not so much that a company which a few years ago froze accounts dealing in cryptocurrency is now wholeheartedly embracing the concept. PayPal is far from the only corporation to realize that it was wrong.

It’s more that a member of the Fortune 500 is publicly endorsing the concept of cryptocurrency. It’s also that the move puts bitcoin in mainstream headlines without the words “hack,” “ransomware” or “money laundering.” This is big-time public validation from a household name. 

Yet the underlying message is even bigger, and this is the part that I find most intriguing:  PayPal is signaling that a digital currency world is inevitable. The functionality of its cryptocurrency service may be limited for now – but it is not necessarily going to stay that way.

PayPal has authorization to transact in cryptocurrency on behalf of its clients in 49 states, but there are no doubt many more regulatory hoops to jump through before the service can comply with KYC/AML rules on a global basis.

We can assume it is working on these. We can also assume that it will iterate its service in response to customer feedback and actual revenue figures. And the company is apparently exploring the acquisition of other crypto companies, presumably to diversify and support its activity in the crypto space.

Beyond that, it seems that what PayPal is really getting ready for is a financial system that has to juggle not only fiat but also central bank digital currencies (CBDCs). In this, it is not alone. 

This week, Japan’s LINE Corporation, best known for its eponymous popular messaging app, revealed that it was working on a platform to support CBDC development. In September, Mastercard (NYSE: MA) announced something similar with a CBDC testing platform.

In July, Visa (NYSE: V) hinted that it also was working with global organizations and policy makers to help shape the evolution of CBDCs, which – whatever form they take – will need access to the target users. 

This raises an interesting question: Is bitcoin an onramp for CBDCs? I confess I had assumed it would be the other way around. I thought that citizens having to manage blockchain wallets in order to transact in the digital currencies issued by their government would open up new markets for decentralized cryptocurrencies and tokens. PayPal could be signaling that, first, users need to get used to the idea. 

Either way, this week’s big announcement feels significant not just for the jolt of energy it has given a lackluster market. It is important for what it hints about what’s coming.

Signals from other financial infrastructure and social reach companies are saying the same thing. It’s not the inflow into crypto markets that’s the big deal here.

It’s that finance is changing in front of our very eyes. Fast.(Note: We use Bitcoin with uppercase when talking about the network, and bitcoin with lowercase, or BTC, when referring to the asset.)

Anyone know what's going on yet?

In a week of lackluster market moves amid U.S. election concerns, the lack of a stimulus package and an uncertain Q3 reporting season, bitcoin totally shone. 





A potential break from traditional market correlation shackles was no doubt partly due to PayPal’s wholehearted embrace of cryptocurrencies.

It was also probably the result of a quiet build-up of macro factors that position bitcoin a wise hedge against inflation rather than a risky bet on technology.  

In cryptoland, the fall tends to be regulators’ open season. As unprecedented as it’s been, 2020 is no exception to this trend. Tensions are high on both sides of the Atlantic:

As markets were still processing the news of the United States Commodity Futures Trading Commission cracking down on derivatives exchange platform BitMEX, the Financial Conduct Authority, the British financial watchdog, moved to ban retail investors from using cryptocurrency derivatives altogether.

The densely packed news cycle has somewhat muffled the impact of another regulatory bomb that dropped a week earlier and is bound to have major lasting effects on the global financial system: The European Union’s proposed legislation for crypto-asset markets.

The far-reaching framework, designed to bestow regulatory clarity upon digital finance businesses serving residents of the European Economic Area, is bound to be especially consequential for two interconnected domains of the crypto industry that have dominated the narrative throughout much of 2020: stablecoins and decentralized finance applications.

What gives?Stablecoins as a threat to stabilityAt the moment, the draft, known as the “Regulation on Markets in Crypto-assets,” or MiCA, exists in the form of a proposal put forth by the European Commission, the EU’s executive branch.

 It is still bound to go through a rather lengthy legislative process before it becomes law, meaning that it might take months and even years before the new rules kick in.

The text makes it apparent that stablecoins, which are also called “asset-referenced tokens” and “e-money tokens” in the document, have been squarely at the top of European lawmakers’ minds:

MiCA singles out this asset class and affords it a bespoke regulatory framework.Under the proposed law, stablecoin issuers will have to be incorporated as a legal entity in one of the EU member states.

Other requirements include provisions related to capital, investor rights, custody of assets, information disclosure and governance arrangements.Albert Isola, the minister for digital and financial services of Gibraltar, explained to Cointelegraph that the reason for the European Commission’s heightened attention to stablecoins is the authority’s concern for the Eurozone’s financial stability:

Stablecoins are widely considered to potentially bring significant benefits as a digital method of payment, providing for greater financial inclusion and a more efficient method of transferring funds. They are also viewed as a potential risk to financial stability and integrity and could dilute the effectiveness of monetary policy. It would appear logical that the European Union may not welcome an entity other than the European Central Bank issuing Euro in an electronic format.

Isola mentioned that “disruptors,” such as the prospective stablecoin Libra, have the potential to significantly decentralize the control of currencies.Seamus Donoghue, vice president for sales and business development at digital finance infrastructure provider Metaco, cited the impressive growth of the stablecoin market in recent months as a prerequisite for regulatory attention, which he called a “positive response”:

The USDC stablecoin’s market cap alone has grown 250% in 2020 from $520 million to $1.86 billion, with a significant acceleration in growth over the last two months. Bank regulators have no doubt also observed that although the asset class in the context of the traditional payments space remains relatively small, it has the potential to have a huge impact on regulated banks and payments incumbents.

The specter of LibraIllustrating the depth of the top EU officials’ concern over preserving the union’s monetary sovereignty is the fact that, earlier in September, “finance ministers of Germany, France, Italy, Spain and the Netherlands issued a joint statement outlining that stablecoin operations in the European Union should be halted until legal, regulatory and oversight challenges had been addressed,” said Konstantin Richter, CEO and founder of the blockchain infrastructure company Blockdaemon.Richter added that some of the more visible figures in European financial policy, such as the German minister of finance, Olaf Scholz, have advocated for the introduction of the regulatory framework.Most experts who talked to Cointelegraph mentioned Facebook-backed stablecoin Libra as the point of departure in the EC’s thinking about the dangers and opportunities that asset-referenced tokens present.

MiCA opens with an explanatory memo that discusses how the crypto asset market is still too “modest in size” to pose a serious threat to financial stability; however, things can change, the framers admit, with the advent of “global stablecoins, which seek wider adoption by incorporating features aimed at stabilizing their value and by exploiting the network effects derived from the firms promoting these assets.

” There has been a single stablecoin project to this date falling into the scope of this description:

Libra.Mattia Rattaggi, board chairman at FICAS AG — a Swiss-based crypto investment management firm — opined that stablecoins are the application of blockchain technology with the highest probability of big impact — something regulators are well aware of:

Stablecoins have grasped the attention of regulators over 12 months ago with the presentation of project Libra by Facebook and have since been closely monitored by the public and regulators around the world. Regulators are realizing that stablecoins are bound to increase efficiency in the payment system — particularly the international one — and promote financial inclusion.

Further hedging against the potential disruption of the Eurozone’s monetary stability, the MiCA proposal specifies even stricter compliance requirements for issuers of asset-referenced tokens deemed “significant.

” The significance criteria include the size of the customer base, market cap, volume of transactions, and even “significance of the issuers’ cross-border activities and the interconnectedness with the financial system.

”Bad news for DeFi?

Stablecoins largely power another sprawling domain of crypto financial activity: a diverse array of applications and protocols that exist under the umbrella of decentralized finance.

Given the stringency of the proposed requirements around asset-referenced tokens, it is plain to see how complicated things can get if, say, the bulk of liquidity locked in a certain decentralized protocol is denominated in a stablecoin that is not compliant by the MiCA standards.

Another major source of uncertainty is the requirement for all crypto-asset service providers, or CASPs, seeking authorization to operate in the EU to be legal entities with an office in one of the member states.

Whether the European authorities will treat individual DeFi apps as CASPs remains an open (and central) question, but if this is the case, developer teams maintaining DeFi protocols might be forced to come up with workarounds that will stretch the notion of “decentralized” incredibly thin.

In their response to the proposed regulation, members of the International Association for Trusted Blockchain Applications expressed their concern that MiCA could effectively bar European residents from participating in DeFi markets.

Martin Worner, the chief operating officer and vice president of blockchain tooling provider Confio, believes that compliance issues could be resolved by implementing on-chain governance mechanisms tailored to specific jurisdictions’ regulatory frameworks:

[This could be] achieved within a self-sovereign framework where the institutions can develop compliant DeFi instruments, which work within their jurisdictions. Just as there are rules about businesses in different jurisdictions and how they do cross-border transfers, the same would apply on the blockchain.

Elsa Madrolle, international general manager at blockchain security company CoolBitX, told Cointelegraph that by the time MiCA becomes law, the DeFi landscape will have likely changed, much as the ICO landscape changed rapidly after the initial boom.

By that time, “it will be quite clear what is required of DeFi projects to operate in the EU or seek out EU customers.

”Madrolle thinks that at that point, DeFi projects will fall into one of two categories — regulated and unregulated — and the big question will be whether the rest of the world will align itself with the European framework.

Nathan Catania, a partner at XReg Consulting — a regulatory and policy firm that has recently published a breakdown of the proposed regulatory framework — is hopeful that it is possible for regulators to reconcile MiCA requirements with not regulating DeFi out of existence. Catania said:

I believe that a project which is sufficiently decentralized and does not provide the service on a professional basis to a third party cannot be considered a CASP and there is still room for DeFi projects to exist.

Today, many DeFi protocols are far from being fully decentralized. The battles over how much decentralization is good enough are still ideological and are primarily fought inside the crypto bubble. It looks like the day when regulators join this debate will come, but with some very tangible implications for crypto businesses.

On Sept. 27, Coinbase CEO Brian Armstrong sought to center his employees’ work around the company’s core mission: “to bring economic freedom to people all over the world.

” Armstrong argues for a narrow interpretation of Coinbase’s mission to build the best possible product because it is “already hugely ambitious” and because companies generally cannot succeed if their goals “include all forms of equality and justice.

” Armstrong’s perspective is not unique to Coinbase and represents a broader tech industry incarnation of the white-savior complex rooted in the belief of the product’s inherent goodness. This belief is especially noteworthy in crypto, given its diversity problem.

Views like Armstrong’s, when coming from a mission-driven cryptocurrency organization, ignore and insult the people and organizations on the ground doing the critical work to financially empower communities. Furthermore, these views overestimate the ability of cryptocurrency to address financial exclusion caused by structural problems as well as technical ones.

Related: The avaricious misanthropy of Brian Armstrong

The technology of cryptocurrency offers solutions and features critical to increasing financial inclusion. Payments can be made in places where cash is at risk of being stolen and where bank accounts are inaccessible. They can also be made anonymously and tied to contracts, all without the need for third parties.

The technical advantages of cryptocurrency, however, do not line up perfectly with the root causes of financial exclusion.

So, while companies such as Coinbase do important work proliferating cryptocurrencies, achieving economic freedom requires more, and crypto projects must be honest about their opportunities to improve financial inclusion as they reckon with their own limitations.

If they are not interested in economic prosperity and freedom, that is perfectly fine — a company’s end goal is its bottom-line profits after all. But if crypto organizations are to legitimately claim a social mission, they must step out from behind their computer monitors to address the limitations of their technical products.

Otherwise, their platitudes for financial prosperity read like an investment bank asserting that it brings economic freedom to the world through increasing market liquidity.

Related: No, blockchain technology cannot solve everything

The limitations of cryptocurrency

While cryptocurrency offers novel ways to create a new financial system, the technology and its proliferation cannot solve the underlying causes of financial exclusion alone.

Today, 1.7 billion people do not have access to a bank account, and billions more do not have access to other basic financial services because institutions have long ignored and oppressed these communities.

Of the people who do have access to the financial system, many are trapped in a cycle of debt without the means to generate wealth. 

According to The Boston Globe, the median net worth of non-immigrant African-American households in Boston is $8. The history of marginalization that cryptocurrency will have to grapple with manifests itself in lack of connectivity, distrust in technology, financial illiteracy, and historical economic and social inequality.

Cryptocurrency requires internet access. Today, only 59% of the world has access to the internet. Smartphones, which serve as a lower barrier to entry for people to access the internet, have a penetration rate of only 45%.

Hidden within these statistics, however, is the fact that many people who do have internet or smartphones may not have stable connections or regular access to electricity.

The overall result is a digital divide preventing billions of people from using cryptocurrency.

Crypto is a novel technology that looks to upend some of the most basic forms of everyday life. Fiat currency is not just an everyday tool but the very basis of people’s livelihoods.

Distrust in cryptocurrency is to be expected, particularly when people cannot see the physical transaction and when mistakes as simple as a forgotten password can make money unrecoverable. Distrust is also higher among people with low income and limited education — the same people who are most likely to be unbanked or underbanked.

Financial illiteracy is also tied to distrust. Financial institutions may offer difficult-to-understand financial products or training, particularly in emerging markets, and some take advantage of consumers through products such as predatory loans.

Lack of financial knowledge also stems from a broader inability to access resources or spending adequate time to understand financial products. As a result, financial illiteracy may prevent people from knowing how or why to use cryptocurrency.

Most importantly, financial exclusion is the result of poverty and inequality tied to oppression. Throughout history, institutions and people in power have excluded or marginalized certain communities, such as women, minorities, rural residents and LGBTQ+ people.

Financial institutions have been part and parcel of this historical exclusion and oppression.

Related: LGBTQ+ in blockchain/crypto: A safe space with room for more inclusion

In the United States, we cannot separate finance from its history in slavery or more recent racial discrimination in lending. Similarly, in Europe finance is intricately tied to colonialism.

The history of oppression connects seamlessly to current wealth inequality and financial exclusion. If people do not have enough money, they simply have no need for access to the financial system.

Cryptocurrency does not generate wealth simply from nothing — it only facilitates the holding and transfer of wealth. Without ways to generate wealth and amid widening economic inequality for over 70% of the global population, people will still find it difficult to use cryptocurrency or have no real use for it at all.

For cryptocurrency to meaningfully move “the needle on large global challenges,” as Armstrong writes, the underlying causes of inequality must be addressed.

And while mission-driven cryptocurrency organizations cannot expect to do this alone, they have an important role to play in developing and directing their products to be used in the service of addressing the underlying problems.

Those who declare they’re on a social mission inevitably sign themselves up for this challenge.

Accounting for cryptocurrency’s limitations

Cryptocurrency offers a novel technical solution to creating a new financial system — this achievement should be celebrated because it has the potential to be truly transformative.

It can be used by people in economically unstable countries such as Argentina to avoid currency volatility or to make anonymous transactions in the face of repressive regimes, for example, Venezuela’s.

In politically stable countries, cryptocurrencies can change everyday life, too.

They give the means to bypass intermediaries that may not be robust, impose exorbitant costs, collect and sell user data, or exclude marginalized groups.

Cryptocurrencies can create a financial infrastructure uniquely suited to addressing financial exclusion, but without enabling easier access to that infrastructure, its benefits are not fully realized.

In response, companies can design easy-to-use crypto products and invest in educating their users. They might also build mobile-friendly decentralized applications, optimize for cheap smartphones and low-bandwidth connectivity, lower the technical barriers to become a validator, and create easy-to-understand user interfaces.

But the real barrier is poverty and people’s inability to access the most basic infrastructure, including the internet and smartphones, which are outside of a cryptocurrency company’s direct mandate.

Unlike a traditional company, a mission-driven crypto organization will have to dedicate its resources to addressing these more underlying systemic problems.

 This can take the form of funding initiatives to increase internet access and financial literacy or engaging in social activism by supporting community organizations working on the ground to alleviate poverty.

A mission-driven company will have to understand the societal problems of today and determine when they can be solved by technology and when they require something more entirely.

Active engagement to do good

Companies are not inherently virtuous because they create technologies that might be used for good. Technology is neutral and open to the direction of anyone who can afford it. Good comes from the active development and implementation of technology by people and mission-driven organizations seeking the resolution of social problems.

Mission-driven cryptocurrency organizations, therefore, must take responsibility for how their technology affects people’s lives and deliberately engage in broader social activism.

To effectively do this, they need to be proximate to the communities in question and treat them as equal partners in the quest for social good.

Twelve years ago, Satoshi Nakamoto published the technical design for Bitcoin (BTC) during a financial crisis originating from historically exclusionary institutions.

The crisis of economic inequality, however, has not ended as evidenced by protests in the U.S. for racial justice and the COVID-19 pandemic, with a severe and disproportionate economic impact on minorities and women.

The financial system needs to be reimagined in order to promote global economic prosperity. In this effort, cryptocurrency organizations can be a crucial player when they engage beyond their technical products to also address the root causes of financial exclusion.

Armstrong is not wrong when he says that the trendy social activism of Silicon Valley companies has “the potential to destroy a lot of value at most companies.

” Doing good costs time and money, and it is rarely profitable. If it were so easy and rewarding, financial exclusion would likely not be a problem for billions of people in the first place.

But that is the point. If a company is to claim that it is mission-driven, it cannot simply make its products and assume that it will be used for good. Even if that assumption is correct, a mission-driven organization must do part of that work itself if it is to ensure its products and work are directed toward doing good.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.This article was co-authored by Nikhil Raghuveera and Stewart Scott.

Nikhil Raghuveera is a fellow at the Atlantic Council GeoTech Center. He previously worked in economic consulting, nonprofit consulting, cryptocurrency and venture capital.

Stewart Scott is a program assistant at the Atlantic Council GeoTech Center.

It's been a challenging year for Wall Street. We've witnessed the quickest bear market decline of at least 30% in history, as well as the most ferocious comeback of all time, with the benchmark S&P 500 taking less than five months to reach new highs.

But one investment that hasn't been phased by the coronavirus pandemic or heightened volatility is the cryptocurrency bitcoin. On a year-to-date basis, through Wednesday evening, Oct. 14, bitcoin was up just shy of 60%.




IMAGE SOURCE: GETTY IMAGES.

Why is bitcoin outperforming in 2020?

Why does bitcoin continue to outperform equities? For one, there's the idea of scarcity. Only 21 million bitcoin tokens can be mined, which creates a level of scarcity that pushes up the value of these digital tokens.

Another reason bitcoin has done so well is the expectation of a digital revolution. This is to say that bitcoin buyers believe the utility of paper money has come and gone.

This could prove somewhat accurate with the pandemic highlighting the potential for physical cash to be a carrier of harmful germs. With the rise of peer-to-peer payment platforms, bitcoin looks to become the superior digital currency.

Bitcoin also benefits from its first-mover advantage in the cryptocurrency space. It was the first digital token to catch on with investors, and happens to be the largest on a market-cap basis by a significant amount (it's five times the size of Ethereum, the second-largest cryptocurrency by market cap).

Today, bitcoin serves as the intermediary asset on a number of crypto investment platforms if you want to purchase a less-common token (i.e., anything not named Ethereum or Ripple).




IMAGE SOURCE: GETTY IMAGES.

Buying bitcoin could be a big mistake

But as good as bitcoin has been for investors in 2020, my blunt opinion is that it's a terrible investment. Here are 10 reasons you should avoid bitcoin like the plague.

1. Bitcoin isn't really scarce

First of all, bitcoin is only as scarce as its programming dictates. Whereas physical metals, such as gold, are limited to what can be mined from the earth, bitcoin's token count is limited by computer programming. It's not out of the question that programmers, with overwhelming community support, could choose to increase bitcoin's token limit at some point in the future. Thus, bitcoin offers the perception of scarcity without actually being scarce.

2. It has a utility problem

The king of cryptocurrencies also has a utility problem. To date, only 18.51 million bitcoin tokens are in circulation, with an estimated 40% of these held by small group of investors. Even considering the fact that fractional token ownership exists, roughly 10 million to 11 million tokens in circulation aren't going to go very far. For context, global gross domestic product was $81 trillion in 2017. Meanwhile, bitcoin has approximately $114 billion to $125 billion in tokens freely circulating and not held tight by investors. There's minimal utility here. 

3. There's a low barrier to entry

Bitcoin may enjoy first-mover advantage at the moment, but the barrier to entry in the cryptocurrency space is especially low. All it takes is time and coding knowledge for blockchain -- the digital and decentralized ledger that records transactions -- to be developed and a digital token to be tethered to the network. There's nothing unique about bitcoin's underlying blockchain that other businesses couldn't one-up.




IMAGE SOURCE: GETTY IMAGES.

4. Few (if any) tangible means to value bitcoin

Another beef with bitcoin is that there's no tangible way to value it as an asset. For instance, if you want to buy shares of a publicly traded company, you can scour income statements, its balance sheet, read about industrywide catalysts, and listen to management commentary from recent conference calls and presentations. In other words, you can make an informed decision.

With bitcoin, there is no tangible data for investors to wrap their hands around. There's transaction settlement times and total circulating token supply, but neither of these figures tells us anything about the value or utility of bitcoin.

5. Fiat currencies may work on blockchain

I believe investors are also placing their faith in the wrong asset. Over the long term, blockchain technology is where the real value lies. Blockchain can be used to reinvent supply-chain management and expedite overseas payments. But when folks are buying into bitcoin, they're gaining ownership in digital tokens with zero ownership of the underlying blockchain.

To build on this point, companies are also testing blockchain that's tethered to fiat currencies. For example, Mastercard (NYSE:MA) was awarded a patent in July 2018 "for linkage of blockchain-based assets to fiat currency amounts." This implies there may not be any need for a made-up digital token to be used at all on blockchain networks.

6. Blockchain is years from being mainstream

A sixth issue is that blockchain is still years away from gaining real relevance. Three years ago, when blockchain companies and cryptocurrency stocks were the hottest thing since sliced bread, it was expected that blockchain technology would be quickly adopted.

Little did investors foresee the Catch-22 that would arise. Specifically, no businesses are willing to make the costly and time-consuming switch to blockchain without the technology being broadly tested -- yet companies aren't willing to make this initial leap to test the technology and prove its scalability.In short, blockchain is years away from being a mainstream technology.




IMAGE SOURCE: GETTY IMAGES.

7. Fraud/theft is a serious issue

By no means are cryptocurrencies the only asset to be hacked by thieves, but there are serious fraud and theft concerns that accompany bitcoin. For instance, novice bitcoin investors may not understand the need to store their tokens in a digital wallet, thereby leaving them susceptible to theft by hackers.

Additionally, it's been hypothesized by numerous blogs and publications that North Korea has turned to bitcoin mining and theft to funnel money into its isolated economy. Bitcoin is commonly viewed as the "currency" of choice for criminal organizations. 

8. There's no regulation

Bitcoin is also an unregulated asset. Though this lack of regulation is actually a selling point for today's crypto investors given that it provides some degree of anonymity, it's bad news if something ever goes wrong. Since the majority of cryptocurrency trading and transactions occur outside the borders of the United States, the Securities and Exchange Commission is very limited in what it can do if your digital tokens are ever stolen.

9. The tax situation is a nightmare

If you think preparing your federal income taxes stinks now, try preparing them after investing in and/or using bitcoin in any transaction. The Internal Revenue Service expects you to report capital gains and losses tied to investment activity, as well as gains and losses associated with purchasing goods and services.

For example, if you bought a single bitcoin token at $11,000, then used a fraction of your bitcoin to buy a new smartphone for $1,000, you'd have to calculate the value of your bitcoin used at the time of the transaction and recognize capital gains or losses relative to your cost basis. It's a gigantic headache.




IMAGE SOURCE: GETTY IMAGES.

10. All bubbles eventually burst

Last, but not least, all next-big-thing investment bubbles eventually burst. No matter how excited investors are about bitcoin and its underlying blockchain, history suggests it won't be enough to match lofty expectations.Mind you, we've already witnessed multiple 80%-plus declines in bitcoin throughout its history.

Extreme volatility is a given with digital currencies like bitcoin, and history would suggest that significant downside from its current price is a near certainty as well.

If you are unfamiliar with cryptocurrency it is unlikely you will know what “Decentralised Finance” (DeFi) is.

Those who do, know that today anyone can exchange their money for a stablecoin (a cryptocurrency backed by a reserve asset), invest them in a promising project and hopefully watch their investment grow.

Is this a variation on the classic pyramid scheme? Not in the sense of Charles Ponzi. But it is clear that the explosive growth of DeFi platforms is driven by a rapid influx of liquidity into the new market, and cannot continue indefinitely.


Nevertheless, the technologies embedded in this infrastructure open up tremendous opportunities for rebuilding the global financial system.The author of this column has devoted 25 years of his life to banking.

Having bought the dwarf National Reserve Bank in Moscow in 1995, I sold it this year as one of the most reliable banks in Russia. It is a shadow of its former self, 20 times smaller, but with no liabilities or obligations.

For a quarter of a century I was the CEO of the third largest private bank in Russia in equity capital terms, after Sberbank and VTB. I was also the constant target of corporate raiders backed by corrupt werewolves from the FSB, which destroyed my business.

Modern bankers ruin their banks by pocketing clients’ money. Since the late 90s, thousands of Russian "banksters" (a portmanteau of "banker" and "gangster") from thousands of banks, appropriated more than $100 billion of their clients’ money and left the country with their stolen money.

Or they opened a new "business" at home, depending on the thickness of the krysha [“roof" in Russian, signifying criminal protection] in government.  

The social function of banks is to serve as the circulatory system of the economy.

They allow transactions in exchange for goods and services, they are engaged in lending, ensuring production, and accumulation of resources. However, the world banking community has turned into an “anti-bank”, whose function is to misappropriate customers’ assets and launder “dirty money”, the volume of which is increasing globally by $1 trillion every year.  


Further confirmation of this can be found in the recent publication by the International Consortium of Investigative Journalists (ICIJ) of the leaked reports of Financial Crimes Enforcement Network (FinCEN – a division of the US Treasury). According to these documents, the five largest international banks laundered $2 trillion even after US authorities had already  fined them for previous misconduct.

As a result, a huge parasitic class has been formed, made of bankers, fake investors, lawyers, auditors and service personnel, who rule entire states called "offshores" and the countries that are invented in them. This class produces nothing but "dirty money".  

Alas, national law enforcement structures and courts are not able to resist this evil on a systemic level – they only provide palliative care, by fighting against individual scams. My appeal for the creation of new international structures remains a lonely one.

Meanwhile, people who really add or invent tangible value in society, by furthering scientific and technological progress or culture, are less and less able to access financial resources.

Their income is incomparable with the wealth of those who are involved in the global oligarchy, which has no physical or intellectual labour at its source.

Billions of people are completely cut off from banking services partially due to their high cost and lack of interest in the poor clients on the part of the banksters, who have nothing to steal from them. A system of financial apartheid drives nations and entire continents into poverty.

This conflict is becoming especially obvious now, amid the backdrop of a recession caused by the coronavirus pandemic. Now money itself, which is printed in huge and unsecured quantities by national financial institutions, is increasingly devaluing.  

Sooner or later, this upside-down pyramid must collapse, and the bubble inflated in the stock markets must burst. Excess liquidity from the stock market will inevitably rush into the real world, turning the depreciating money into dust, regardless of their denomination. This will lead to another apocalypse-scale heist.

Fortunately, the human mind does not stand still. Cryptocurrencies, which 10 years ago were perceived as a joke and a toy, are today an important part of the international financial system. The next step will be the "digitalisation" of real assets, including production facilities, real estate, goods and services, with their holding in distributed ledgers.

Many governments that foresee the benefits of these technologies are beginning to implement them. In March, the German Federal Financial Supervision Authority (BaFin) recognised cryptocurrencies as financial instruments.

On 11 August, the German Federal Ministry of Finance (BMF) and the Federal Ministry of Justice and Consumer Protection (BMJV) presented a bill on blockchain-based digital securities.

Xi Jinping, the leader of the most populous and second richest country in the world, said a year ago that the development of blockchain is one of the most urgent tasks for the state.  

Last April, the Central Bank of China, as part of a pilot program, introduced a national cryptocurrency (DCEP) in four major cities in the country. The site for the 2022 Winter Olympics, to be held in Beijing, will also be the basis for exploring opportunities with DCEP.  

The latest news, on 3 September, is that the Swiss canton of Zug began accepting tax payments in Bitcoin and Ethereum. Оn 21 September, the United States Office of the Comptroller of the Currency (OCC) and the Securities and Exchange Commission (SEC) published a stablecoin guide, which provides the first detailed national guidance on how fiat-backed cryptocurrencies should be treated in accordance with the law.

Thus, the regulators gave the green light to work with the issuers (or founders) of stablecoins.

Take a look around: tools that until recently were the dreams of science fiction are becoming reality.

Artificial intelligence is already driving vehicles, and the profession of ‘driver’ may die within the next decade. In the same way, blockchain technologies and smart contracts will make it unnecessary to employ the vast majority of people in the financial sector, and will thus eliminate "banksters" as a social phenomenon.  

With Decentralized Finance (DeFi), it became possible to directly connect clients of traditional banks without the participation of an intermediary in the form of the bank itself, the functionality of which in this case is performed by a so-called “smart contract”.

At the same time, no one will be able to steal a client’s money, because the DeFi system protects them from greedy bankers. A smart contract obeys only the laws of mathematics and, aside from the risk of computer hacking which also exists in conventional banking, it is incorruptible – and it does not need villas on the French Riviera, nor private jets or yachts.  

The current DeFi projects are based on the exchange of liquid tokens (mainly decentralised cryptocurrencies) on the principles of collateralised lending. They are quite primitive and serve either for simple mortgage lending, or for the so-called “Yield Farming” – empty inflation of liquidity for the sake of stock growth with their subsequent sale on the free market.

For example, I have invested $100,000 in one such DeFi platform licensed in Estonia, just out of curiosity. Three days later I checked my digital wallet and found out that I had already earned over $300, which I easily transferred to my bank account via crypto exchange. (I should point out this isn’t investment advice and people should check before putting their money in any particular crypto-currency or platform).

The Independent Decentralized Financial Ecosystem (some might call it a "bank 2.0"), which I am looking to set up with some partners, represents a new generation of bank in which all participants are simultaneously beneficiaries.

It would offer customers the full range of services of traditional banks. Those include currency exchange, deposits, lending, settlement and cash services, local and international transfers. The fundamental distinctness of this platform comes from its supranationality. 

The system for the execution of smart contracts based on blockchain technology is located on the network simultaneously everywhere and nowhere.

 Whatever happens to the people who manage the system, all obligations will be fulfilled, since they are not dependent on personal decency, rather they are enshrined in smart contracts. In this case, of course, it is necessary to monitor the full legal compliance of the issue of credit-collateral tokens with the legislation of the country in which it is carried out.

The most significant aspect of this project will be to provide a working platform for a huge number of third-party start-ups and innovation. This is a mechanism that will ultimately connect a Thai-based IT creator in need of funding, or a waste recycling entrepreneur in Zimbabwe, with a potential investor from Norway or Japan.

The system will include hundreds and thousands of projects of talented people, each of which will become part of the global infrastructure – just like any major bank has hundreds and thousands of projects, related to a financial institution.

Besides, this system will provide additional opportunities for financial transparency in the implementation of non-profit projects – for example environmental protection. Or charity, which, alas, suffers from the fact that half of the hundreds of billions USD donations allocated annually around the world are simply stolen directly or through so-called "management expenses".
  This year my son Evgeny and I visited Chad – to support the local national park. At N'Djamena International Airport, against the backdrop of several dilapidated ancient Cessnas, sat a new Bombardier Global Express jet – white with blue letters “UN OCHA” (United Nations Office for the Coordination of Humanitarian Affairs). I once had one, it costs $60m.  

And when we flew away, there was a similarly "branded" Embraer Legacy worth $30m. There are cargo planes for the transportation of humanitarian aid, which are much cheaper and more spacious. I wondered how many hungry Chadians could be helped with this money from the international community, spent by UN officials for their own comfort?

Crypto-economics allows a donor of any amount, even one pound, to follow their donation to a poor child in Bosnia in need of an expensive operation, to a farmer in Uganda in need of new technology, or to a particular elephant in Gabon. All this information can be completely opened up to the relevant parties through the charity token blockchain.

Perhaps we are on the verge of a real revolution in the international financial system, and the end of the bankster. I do not pretend to be the ultimate oracle of truth; there is much to debate in my piece. Yet one thing is indisputable: in the form in which this system exists now, it is leading the world economy to disaster.

Alexander Lebedev’s family co-own The Independent and Evening Standard titles