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First Mover: Forget Facebook’s Stablecoin. Now It’s $700B Bitcoin in the Crosshairs



Bitcoin (BTC) was higher, pushing back toward $40,000 after a 9.9% surge on Wednesday, the biggest calendar-day gain in a month.  

Such a powerful recovery after a steep sell-off earlier in the week has quickly reinvigorated trader spirits. “This bubble doesn’t look set to burst,” said Don Guo, CEO of Broctagon Fintech Group, which helps smaller cryptocurrency exchanges tap into bigger pools of liquidity available from large exchanges. 

In traditional markets, U.S. government bond yields rose along with stocks after CNN reported that President-elect Joe Biden will unveil on Thursday a new coronavirus relief proposal, and that his advisers have told allies in Congress to expect a price tag around $2 trillion. Gold weakened 0.2% to $1,841 an ounce. 

Market moves

Before the coronavirus hit last year, a big conversation among financial-industry executives, lawmakers and regulators was just how to regulate libra, the proposed digital currency from Facebook. 

“With Facebook’s very large network of more than a billion people, a stablecoin could have systemic implications very quickly,” Powell said in a September 2019 webcast discussion in Zurich with Swiss National Bank Chairman Thomas Jordan. “Libra would have to be held to the highest regulatory standards and expectations.” 

Fast forward and the Facebook-sponsored token (since retooled and rebranded) still hasn’t launched. Instead, it’s now bitcoin, the original and largest cryptocurrency, suddenly attracting the overseers’ notice. 

Bitcoin is a “highly speculative asset,” European Central Bank President Christine Lagarde said Wednesday at a Reuters event. According to the news service, she joined a number of regulators from across the world in calling for implementing global rules for cryptocurrencies.

“There has to be regulation,” Lagarde said. “This has to be applied and agreed upon.”

A doubling in prices for bitcoin in 2019, a quadrupling last year and another 32% gain just in the first two weeks of 2021 have quickly given the cryptocurrency a $709 billion market value.

Everybody knows bitcoin’s price is volatile, which was less of a concern a couple years ago when it was just one of those “no value” cryptocurrencies. A little extrapolation shows why the topic is getting harder to ignore. 

Another quadrupling in price (hypothetically speaking of course) would push bitcoin’s market capitalization to nearly $3 trillion. That’s roughly the same amount of new money the Federal Reserve printed last year and then pumped into traditional financial markets last year to keep them from faltering. 

A big number, in other words. So-called leveraged loans, which banks provide to junk-grade companies and then sell to investors for trading on Wall Street, grew so fast over the past decade that the Federal Reserve warned in early 2019 of the growing risks. The total outstanding amount of these junk loans currently stands at about $1.7 trillion.   

Inverted-scale bitcoin price chart shows how the dollar and euro have plunged in bitcoin terms.
Source: TradingView/CoinDesk

With the coronavirus dimming the appeal of paper bills, central banks around the globe have accelerated efforts to develop or at least study digital versions of their own currencies. China’s is already in trials. Earlier this week the Fed’s New York branch, which handles the U.S. central bank’s money-market operations, announced it had retained the recruiting firm Heidrick & Struggles to recruit an inaugural director for a planned New York Innovation Center, which will “develop in-depth insights into critical trends in financial technology.” 

A big dilemma regulators face is the Bitcoin blockchain was designed as an autonomous, peer-to-peer electronic payment system using distributed-ledger technology – theoretically beyond the control of any person, business or government. So the Fed can’t just order bitcoin to stand down, as it essentially did to Facebook.  

But according to a report published Wednesday by analysts with Macquarie, the big Australian investment bank, “private cryptocurrencies” like bitcoin are fast making inroads into electronic commerce, and it looks unlikely a digital dollar or digital euro could launch until 2022 at the earliest. 

“We think the use cases for private crypto could come to fruition if commerce becomes too accustomed to private crypto use prior to a central bank digital currency alternative launching as a stable, legitimate alternative,” the Macquarie analysts wrote. “U.S. regulatory officials wield quite a bit of power over how cryptos function and how their ecosystems develop. This becomes less meaningful as the network effect of cryptos grows, utility and acceptance broaden, and fiat potentially loses some demand for commerce.”

The acting U.S. comptroller of the currency, Brian Brooks, who is a former general counsel of the cryptocurrency exchange Coinbase, has used the final days of President Donald Trump’s  four-year term to expound on the virtues of cryptocurrencies.

“Crypto is about freedom,” Brooks said in a livestreamed event hosted by blockchain analysis firm Elliptic, as reported by CoinDesk’s Nikhilesh De. In a Financial Times op-ed, Brooks wrote of the potential opportunity from “self-driving banks” built atop decentralized-finance networks.

“Their greater efficiency would free significant amounts of capital that is lost to operating costs today or slowed by decisions dependent on human grey matter,” Brooks argued. He plans to step down from the regulatory role on Thursday.

Charlie Morris, CEO of the cryptocurrency fund manager ByteTree, wrote Wednesday in his weekly newsletter that bitcoin might be “ready to challenge the financial system.” 

“It is an open-source project, which has attracted some of the finest minds in the world,” Morris wrote. “This leads to continuous improvement, which means an infinite number of applications lie ahead. The massive development effort has centered around bitcoin, as opposed to other cryptos, because it dominates the ecosystem and faces the power laws behind the network effect.”

Also, Bloomberg News, citing a report from the publicly traded hedge fund Man Group, reported Wednesday that bitcoin differs from other investment bubbles like tulips, railroads and dot-com stocks, in that it has “survived three peak-to-trough drawdowns of over 80%” in fewer than 10 years. 

Indeed, one thing that might be troubling regulators and bankers alike is the growing conviction among both crypto-industry executives and some big investors that the growth cycle in digital assets is still in its early stages.      

“How long until the entire legacy financial system migrates over to a digital Internet on the Web 3.0 based on distributed-ledger technology?” Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics, wrote Wednesday. “My feeling is that we’re still early.”

Read More: Bitcoin in Race for Adoption Before Central Banks Launch Digital Currencies: Australia’s Macquarie

Bitcoin watch

Chart of daily bitcoin trading volumes with price chart superimposed, showing how low the volume has been during bitcoin’s latest rally over the past two days.
Source: Skew.

Bitcoin jumped above $38,000 early Thursday, erasing a significant chunk of Monday’s drop from $40,000 to $30,305.

However, the quick recovery has been charted on the back of low trading volumes, as noted by the crypto derivatives research firm Skew. A low-volume bounce is often short-lived.

That said, the options market is betting on a continued rally and is assigning a 20% probability of the cryptocurrency rising above $50,000 by Jan. 29 (monthly expiry).

The 20% probability looks impressive, considering the monthly expiry is just two weeks away, and the cryptocurrency is currently down 31% from $50,000.

The bullish sentiment is quite strong, as indicated by increased demand for higher strike call options. 

“In the past 24 hours, the $52,000 call option has registered a buying volume of 2,059 contracts. Meanwhile, the $36,000 call has seen a buying volume of 1,211 contracts,” Swiss-based data analytics platform Laevitas told CoinDesk

Read More: Bitcoin Bounces as Options Market Sees 20% Chance of $50K at Month’s End

What’s hot

Deribit exchange raises maximum bitcoin options strike price to $400K (CoinDesk) 

Anchorage becomes first federally chartered crypto bank in U.S. (CoinDesk) 

Winklevoss twins open to taking Gemini, their cryptocurrency exchange, public (Bloomberg) 

Grayscale begins dissolution of XRP Trust, citing Ripple SEC suit (CoinDesk) (EDITOR’S NOTE: Grayscale is a unit of Digital Currency Group, which owns CoinDesk.) 

Crypto buyers face ‘possible limitations’ on eToro this weekend (CoinDesk) 

IHS Markit will likely join cryptocurrency index game, executive says (CoinDesk) 

Aragon faces wave of resignations and it’s not clear why (The Defiant) 

Decentralized-exchange aggregator 1inch, founded in 2019, reaches $10B in trading volume (CryptoSlate) 

Digital-asset investment firm Arca raises $10M in series A funding (Press release via Cision) 

Cryptocurrency trading platform CrossTower launches capital markets desk for institutional clients (CoinDesk) 

U.S. SEC Commissioner Hester “Crypto Mom” Peirce says regulators can take a “fresh look” at crypto regulation under President-elect Joe Biden (Decrypt)

These DeFi tokens have double-digit gains as bitcoin’s growth tapers (CoinDesk)

Inside Colombia’s race to become a major regional crypto market (CoinDesk)

Trading Hall of Fame: The bitcoin options bet that made $58.2M profit on just $638K (CoinDesk)  


The latest on the economy and traditional finance

U.S. Senate Democrats plan quick action expanding coronavirus relief payments to $2,000 (NYT) 

Newly appointed director of the U.S. National Economic Council, Brian Deese, says focus will be on domestic investment in tech sector, not tariffs on China (Nikkei Asia Review)

U.S. budget deficit hits $573B in first fiscal quarter (October-December), a record for the period and up 61% from a year earlier, as outlays rise from coronavirus relief spending and unemployment benefits (Bloomberg) 

Raising suspicions of money laundering, Australia’s financial watchdog jointly reviewed funds sent from the Vatican from 2014-2020 that were much less than initially claimed (Reuters)

Federal Reserve balance sheet to hit $8.8T at year-end 2021, with no tapering of asset purchases until 2022, Bank of America economists predict.

Projected pace of U.S. Treasury-bond purchases by the Federal Reserve, as estimated by Bank of America economists.
Source: Bank of America

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The Bitcoin Whales Won’t Stop Buying




According to a number of different data points, bitcoin whales saw last week’s volatility and price declines as a chance to accumulate.

This episode is sponsored by

Today’s grab-bag episode looks at five different topics:

  • Bitcoin whales kept accumulating during last week’s dip
  • Jim Cramer advises Powerball winner to put 5% in bitcoin
  • Previewing the first FOMC meeting of the Biden Administration
  • Earnings week on Wall Street looks good for Big Tech
  • An insider’s look at the state of crypto venture capital

Image credit: munandme/Getty Images Plus

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We Have Entered the Age of Anonymous Crypto




Recently, following a change to Whatsapp’s privacy policy, hundreds of thousands of people from all over the world left for other services. Signal, an encrypted messenger service, saw so many sign-ups that it temporarily crashed.

This was followed by a mass exodus from social media, as Twitter and Facebook became embroiled in a debate on free speech and censorship, a chain of events that may signal a shift in how users value privacy.

Rachel-Rose O’Leary is a coder and writer at Dark Renaissance Technologies. She was a tech writer for CoinDesk from 2017 to 2018, covering privacy tech and Ethereum. She has a background in digital art and philosophy, and has been writing about crypto since 2015. The views expressed in this article are her own and do not necessarily reflect those of the publication.

Riccardo Spangi or “fluffypony,” the former lead maintainer of privacy-centric cryptocurrency monero, called this a “watershed moment” for privacy. “People are realizing that you don’t get privacy just handed to you. You have to stand up and take it,” he told CoinDesk.

For years, topics including anonymity, censorship resistance and decentralization were the purview of political extremists. Armed with a pessimistic, even paranoid outlook, the forefathers of cryptocurrency engineered tools, like Bitcoin, for a world where civilization had fallen.

But now, spurred on by an information crisis and compounding global unrest, privacy has entered popular consciousness.

As on the popular consumer-facing apps such as Signal, activity on the encrypted anonymous internet, the darknet, is on the rise. While it’s hard to estimate usage due to its anonymity benefits, Tor Browser was downloaded 10% more on average this January than last year. In the past 12 months, the number of hidden websites has increased 180%.

This rising popularity could be driving an increase in monero transactions. In December, darknet market Whitehouse reportedly announced it would no longer accept bitcoin payments, strengthening monero’s foothold as the cryptocurrency of choice for the darknet. 

See also: Steven Waterhouse – The Pandemic Turbocharged Online Privacy Concerns

In fact, despite being delisted from exchanges Shapeshift and Bittrex, monero’s price has steadily grown 140% in the past year, while its daily transactions have increased by a staggering 290%. Zcash has likewise increased nearly 70% in price. 

All of this is to say there’s a growing demand for privacy. What’s more, the privacy scene has never been more prepared for an influx of users. 

A new dawn

Privacy has always been a core value of the crypto-anarchist philosophy. Bitcoin itself was designed to be pseudonymous, but its privacy-protecting features are insufficient to protect users from blockchain analysis. 

In the past 10 years, fully anonymous cryptocurrency has emerged as a Holy Grail of blockchain research. Millions in research dollars have been committed, though until recently no purely private cryptos emerged without substantial trade-offs to scalability and decentralization.

Several small, incremental achievements are beginning to come to fruition. Litecoin is testing a potential privacy upgrade, Mimblewimble. Privacy coin Firo, previously named Zcoin, is pioneering new cryptographic research with its recent release of Lelantus.

Meanwhile, earlier this month, Zcash announced its plan to implement Halo 2, a groundbreaking upgrade that will allow the cryptocurrency to add new assets to its base layer, such as an anonymous stablecoin or wrapped versions of other cryptocurrencies – while Monero is also building toward a multi-chain paradigm, specifically with privacy implications for Bitcoin through atomic swaps.

Further, while Monero’s ring signatures reduce its anonymity, a new upgrade called TRIPTYCH will make this privacy leakage less of a concern.

Bitcoin, too, will see privacy-protecting enhancements with the long-anticipated rollout of its Taproot upgrade. When activated, Taproot will allow smart contracts written in the Bitcoin scripting language to appear like normal transactions, so more complex code can populate the blockchain undetected.

It’s not just traditional cryptocurrencies that are undergoing a renaissance. Privacy apps are proliferating on decentralized finance (DeFi) while private smart contract platforms like Secret Network and Aleo are enabling general purpose, programmable privacy. 

Can the state withstand a full-blown Bitcoin offensive?

Amir Taaki has been working on anonymity tech in crypto for nearly 10 years.

“Zero-knowledge is probably the biggest breakthrough in cryptocurrency since the invention of Bitcoin itself. It enables an entire new class of privacy applications that previously couldn’t exist before,” he said.

The darkening

Advances in privacy tech have the potential to revolutionize not just cryptocurrency, but all aspects of how we interact with the web. The internet is currently dominated by data harvesting and surveillance. In exchange for using a service, user data is collected by companies for increasingly surreal purposes, such as behavior prediction and control. 

By offering a new economic vision for technology, the cryptocurrency ecosystem has the potential to challenge this paradigm. Mixnet provider Nym Technologies is working in this direction, offering privacy-friendly applications the ability to monetize their services.

Still, these new vistas will not be without their challenges. For the last year, crypto has been awash with rumors and headlines foretelling an impending regulatory crackdown. 

In an interview that coincided with her statement that the European Central Bank (ECB) will release its own digital currency – the digital euro – within the next five years, ECB President Christine Lagarde called for global bitcoin regulation. Separately,  U.S. Treasury Secretary nominee Janet Yellen said that cryptocurrencies are a “particular concern” for terrorism financing, and stated the need to “curtail their use.”

Both the U.S. and European Union – formerly a privacy stronghold – have also floated rules that threaten end-to-end encryption and privately held crypto addresses.

See also: Proposed Crypto Wallet Rule Among Those Frozen by Biden Pending Review

If there was ever a need for strong, unhackable, privacy-preserving tools to be built, it’s now. 

Worst-case scenario

Regulatory pressure may have an unintended consequence by making privacy-preserving cryptocurrencies more attractive. In a scenario where crypto is banned, crypto will merely go underground, where it had its beginnings.

A nightmare scenario for an industry overrun by bankers, such a grim regulatory outlook is widely dismissed as FUD. Not only would this cripple the emerging cryptocurrency ecosystem financially, but it would severely damage its core value propositions: openness, accessibility, being permissionless.

Still, perhaps in anticipation of regulatory crackdowns, Bitcoiners are adopting an increasingly militant rhetoric. Rumors of an impending “privacy war” have been circulating on Twitter, with cryptocurrency advocates volunteering themselves for the front line. 

According to Taaki, such a confrontation is effectively preprogrammed.

“I don’t see a resolution between an emerging cryptocurrency industry and the state-backed fiat system,” he said, “These things are [at] loggerheads, and using anonymity to shield participants in a network is of vital importance to our success as a movement.” 

See also: Michael Casey – A World Where Privacy and Saving Lives Can Coexist

The developer of privacy-focused Bitcoin wallet Wasabi, Max Hillebrand, said he is confident Bitcoin’s users will step up to the challenge. Armed with advanced technology and an ideology capable of carrying its followers to the barricades, he wondered:

“Can the state withstand a full-blown Bitcoin offensive?”

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Harvard, Yale, Brown Endowments Have Been Buying Bitcoin for at Least a Year: Sources




Some of the largest university endowment funds in the U.S. have been quietly buying cryptocurrency for the past year or so through accounts held at Coinbase and other exchanges, CoinDesk has learned.

According to two sources familiar with the situation, Harvard, Yale, Brown and the University of Michigan as well as several other colleges have been buying crypto directly on exchanges. (Several Ivy League endowments took an interest in blockchain technology via crypto-focused venture capital funds back in 2018.)

“There are quite a few,” said a source who asked to remain unnamed. “A lot of endowments are allocating a little bit to crypto at the moment.”

Yale and Brown did not respond to requests for comment by press time. When reached by CoinDesk, the Harvard and University of Michigan endowments declined to comment. Coinbase also declined to comment. University endowments got a single mention in Coinbase’s annual report for 2020, but without naming any names.

Some of the university endowment funds in question may have held accounts with Coinbase for as long as 18 months, according to one source. 

“It could be since mid-2019,” the source said. “Most have been in at least a year. I would think they will probably discuss it publicly at some point this year. I suspect they would be sitting on some pretty nice chunks of return.”

University endowments are pools of capital accumulated by academic institutions, often in the form of charitable donations. These funds, which support teaching and research, can be allocated into various assets for investment purposes.

Harvard’s is the largest university endowment with over $40 billion in assets. Yale has over $30 billion, Michigan has about $12.5 billion, while Brown holds $4.7 billion. It is unknown how much each fund has allocated in crypto but it is likely a fraction of percent of their total assets.

Back in 2018, Yale University Chief Investment Officer David Swensen made headlines by backing two crypto-focused venture funds, one run by Andreessen Horowitz and another launched by Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang.

Several other universities followed Yale in backing crypto VCs, including Harvard, Stanford, Dartmouth College, MIT, University of North Carolina and Michigan. Clearly, some of those schools appear to be taking the next step by investing directly in crypto assets.

The second source, who is involved in the crypto hedge fund world, pointed to “a big change” over the past few months. “We are seeing defined benefit pension plans getting close to making allocations. We are seeing public pension plans getting close to making allocations,” the person said.

“If I had heard that three years ago, I would have said it was wrong,” said Ari Paul, co-founder of BlockTower Capital and previously an investment manager for the University of Chicago. “But a lot of institutions are now comfortable with bitcoin. They understand it and can just buy it directly, as long as it’s from a regulated entity like Coinbase, Fidelity or Anchorage.”

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