This Week In Crypto (Mar. 2–9, 2019)
By Yaniv Feldman on ALTCOIN MAGAZINE
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This week, we’ve witnessed a few interesting developments, each of them separately and all of them together, show increasing signs of market maturation. No, we are not there yet, but all of the events we’ve chosen to dive into this week are significant signs that the market is becoming more robust and is showing an important ability to adapt to new situations, which is one of the most important traits for any industry, let alone a financial one.
1) Binance’s Crypto BNB No Longer Tracks Bitcoin — And That’s a Big Deal.
After a 50% rise in the last 7 days alone, BNB, the Binance Coin, is showing signs of actual decoupling from Bitcoin. Most price gains are attributed to Binance’s Launchpad initiative, that has amazingly brought back the ICO trend back to life in the middle of crypto winter. Both previous ICO’s that launched on the platform, Tron’s BitTorrent Token and Fetch.AI, have sold out in a matter of minutes and their prices have risen up to x6 of their initial price before crashing back down. Giving ICO investors an opportunity for a 600% on their money in a matter of hours is exactly the kind of “get rich quick” schemes that have led the ICO boom and the fact that the only way to get access to this amazing deal is by using BNB tokens, has lead to a huge increase in demand.
Why is this important? Even though it is still very much winter in crypto land and in first glance, this looks like nothing more than a passing trend. The fundamentals on ICOs haven’t changed, and most utility tokens, including those that were launched on the platform, don’t show any kind of sustainable value for their token holders. And even if Binance still hasn’t built an actual value for their token, it seems like it might be the first one that has actually managed to create actual demand for USAGE for its token, instead of just speculating its value (even if its usage for the purpose of just another speculation. 🤦♂️). With an ever-growing trading volume, alongside the imminent launch of its own Blockchain (which will be used as a platform for the issuance of additional tokens), and its own DEX (where BNB would be used for fees) BNB is purposely aiming for the same value model that brought Ethereum to $1400 in early 2018. Considering that BNB’s current audience is mostly speculative traders, and the fact that they are already in the millions, provide a better fit than what the original Ethereum user audience was back then.
2) BlockFi Now Offers a Crypto Deposit Account With Compound Interest.
BlockFi Interest Account (BIA) is now live and offers customers an annual interest rate of 6 percent, paid on a monthly basis in cryptocurrency. That monthly interest is then compounded to produce a 6.2 percent annual percentage yield or APY. The move is backed by Gemini Trust who will act as BlockFi’s accounts custodian.
Why is this important? If we crypto wants to be able to live on its own merits, it needs to supply its users/investors with the same financial tools that are available for them back in the traditional financial world. One of these tools is a basic interest account, where investors can keep their coins for longer periods of time and enjoying a relatively low, “risk-free”, interest. The business of loans isn’t something new, even for the crypto industry. This latest move by BlockFi, however, signals increasing interest by the market for more mature instruments. The attractive interest is meant to lure HODLers that have no intention in selling their holdings in the near future, to put their coins and at gain basic interest, instead of just “sitting” on their coins. Even though some of the earlier, hard-core investors, would be reluctant to give control of their coins (Not your keys, not your Bitcoin), the fact that BlockFi partnered with a regulated custodian (Gemini Trust holds a Bitlicense and is regulated by the NYDFS) is supposed to at least tone down some of the risk.
3) MakerDAO Token Holders Approve Fee Increase for Ethereum Stablecoin DAI.
Finalized Thursday, the first round of voting will put in motion another vote to raise the “DAI Stability Fee” that would increase this cost to users to 3.5 percent, up from 1.5 percent today, pending what appear to be administrative measures.
Why is this important? MakerDAO is by many ways the first actual on-chain central bank. While most other stable coins are backed, issued and governed by a central entity, the entire process of issuing, redeeming and managing the value of Dai is done (mostly) in a decentralized. One of the situations that put the ability of such a system to function properly are situations that require a non-automated intervention in the market, in order to change some of the system’s parameters so it will be able to maintain the Dai’s pegged value to the US Dollar. Even though we still don’t know whether the increase in stability fee will help Dai maintain its peg, the fact that the process worked smoothly is a big win for on-chain decentralized governance in general and Open Finance specifically.
If you are interested in learning more about MakerDAO and how it works, Placeholder Capital just released an extensive, yet relatively simple to understand, guide on the inner works of the system.
🍀 The Good News
Global Blockchain Spending Will Grow About 89% in 2019. According to the report, the financial sector will be the leading industry in terms of spending in blockchain development this year. Banking, securities, investment services and insurance services are forecasted to invest more than $1.1 billion out of the total global blockchain spending. In turn, manufacturing and distribution services are predicted to see spending on blockchain amount to $653 million and $642 million respectively in 2019.
SIX Swiss Exchange Launches Ethereum-Based Exchange-Traded Product. Backed by the Swiss startup Amun AG, the new Ethereum-based ETP will be trading under the index AETH. The management fee of Ethereum ETP will amount to 2.5 percent.
BitGo wants to build a ‘virtual order book’ to radically transform crypto’s market structure. The firm is looking to expand that platform to create a global pool of liquidity, connecting possibly dozens of exchanges.
Feb Volume Report: Leading Markets Post Strongest Month Since Q1 2018. The increase in trade activity was driven by the run up to $4,000 during the middle weeks of February, with volume having since retraced amid sideways consolidation. The surge in activity comprised a 34% gain in trade activity month-over-month.
Report: There are more ICOs — but they’re raising less. Despite 40 more ICOs closing out during the fourth quarter of 2018, the total funds raised fell from nearly 1.9 billion in Q3 down to 1.4 billion — a 23 percent decrease. At the same time, the average “ICOBench rating” of a successful ICO increased from 3.5 to 3.6.
Crypto Trading Giant Circle Wants to Raise $250 Million in Funding. Circle was valued at a formidable $3 billion at the time of its last funding round when it raised $110 million, largely from Bitmain. The $3 billion valuation may have decreased since then, with some analysts estimating that it has since shrunk to $750 million as a result of the recent crypto-economic downturn.
🥀 The Bad News
Reacting to Public Ire, Coinbase Drops Neutrino Execs With Hacking Team Ties. After a week of community discontent, cryptocurrency exchange Coinbase has decided to sever its business relationship with Neutrino employees who previously worked at the notorious Italian malware/software provider Hacking Team. In the meantime, both Chainalysis and Elliptic have issued statements denying any kind of external data sales, in which they were accused by coinbase.
Bitmain’s Future Uncertain; Bitmain co-founders Micree Zhan Off to Build A New Mining Business and Jihan Wu to a New Blockchain Company called Matrix. With one month left until another filing update with the Hong Kong Stock Exchange, Bitmain is going through a comprehensive business transformation in an attempt to preserve capital. In addition to the massive layoffs, Bitmain has also initiated a joint mining business and is divesting its non-core AI businesses.
Why Crypto Companies Still Can’t Open Checking Accounts. Existing customers of Big banks like HSBC Holdings Plc and JPMorgan Chase & Co are facing difficulty to access basic banking services because the banks are routinely refused to do so. (To note, these customers are the entrepreneurs of crypto-related firms across NewYork and Hong Kong)
Crypto hedge fund shutdowns are leading to layoffs in the OTC world. Crypto winter has finally found its way to a corner of the digital asset market known for its high margins: over-the-counter trading. In recent weeks, two over-the-counter trading operations have run into significant headwinds — with one firm shutting its desk altogether.
📙 Best Long reads for the weekend
A Forensic Analysis of Blockchain Surveillance Companies. Blockchain analysis is big business. The U.S. government alone has spent $6 million on transaction mapping tools, while cryptocurrency exchanges routinely partner with compliance companies that promise to track and trace the origin of customer funds. Hated by many bitcoiners, blockchain forensics is a controversial field with a plethora of players. The following analysis shines a spotlight on the companies who scrutinize you.
Decentralized Finance Is a Continuum. Decentralized finance, otherwise known as DeFi, sits at the intersection of financial products and services with decentralized networks and open protocols. The implications of DeFi will be pronounced across both developed and emerging markets.
Why Crypto Companies Still Can’t Open Checking Accounts. Existing customers of Big banks like HSBC Holdings Plc and JPMorgan Chase & Co are facing difficulty to access basic banking services because the banks are routinely refused to do so. (To note, these customers are the entrepreneurs of crypto-related firms across NewYork and Hong Kong).
Crypto Jurisdiction. Jurisdiction is a complex legal doctrine, but a fairly simple concept. Jurisdiction is how legal regimes govern crypto, and how crypto will govern legal regimes.
Is Uniswap Ethereum’s unicorn? Uniswap has quickly positioned itself as a leading decentralized exchange, outcompeting 0x relayers and Bancor for liquidity and volume. Uniswap’s Automated Market Maker model allows anyone to contribute liquidity in return for a 0.3 percent fee on each trade. While liquidity provider returns have been strong to date, the threat of ‘impermanent loss’ threatens to destabilize ROI.
No, Facebook’s ‘FaceCoin’ Will Be Nothing Like Bitcoin (Or Even a Cryptocurrency). Facebook, Telegram, and Signal are reportedly planning to mint their own digital coins for their platform. But their centralized nature means that they won’t be censorship-resistant, decentralized and secure by design, unlike Bitcoin.
Can JPM Coin disrupt the existing stablecoin market? JPM Coin marks the first experiment of a new type of stablecoin that would rely on private blockchains, marking a transition from an interest-collecting business model to one that is targeted at improving internal processes. While JPM Coin does have the potential to materially impact traditional financial services (related to institutional client use cases such as clearing and settlement), it will not displace liquid, publicly traded stablecoins in the near-term given its private, permissioned structure.
The five camps of crypto. The industry is littered with varying opinions on what Satoshi meant, what blockchain enables, how much decentralization matters, and (perhaps most contentiously) what is realistically achievable. It’s our belief that the voices in the space can be boiled down into five primary schools of thought, or camps.
The Best Time to Buy & Build Tokens. Just as people in 2017 regretted their 2014/2015/2016 decision to abandon bitcoin for blockchain, many people in 2021 will regret their 2018/2019/2020 decision to abandon tokens for equity. Especially if they had a good idea but faltered due to the bearishness of the climate.
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