DDI Blockchain Weekly (September 3rd – 9th)

3 min read

It was a week to forget for crypto bulls as the market crashed on Wednesday, losing $40 billion in less than 24 hours. The plunge seems to have been triggered by news that Goldman Sachs was ditching its plans to open up a crypto trading desk. And despite the bank coming out to call the reports ‘fake news’, the market continued to fall, albeit less dramatically. Markets ended the week below $200 billion, thus wiping out the steady gains achieved during the second half of August. Although virtually every crypto saw red, eyes were particularly focused on one market…

Ethereum drops below $200


A dismal week for Ethereum saw it plummet to levels last seen in July 2017. Several reasons have been touted for the pronounced drop. Bitcoin core developer Jeremy Rubin suggested ETH could go down to zero, not only in market price, but also as a utility token within the network, because if decentralized apps (dApps) and ERC20 tokens can run on Ethereum without needing ETH to cover gas costs, then there exists no value for ETH. But Ethereum founder Vitalik Buterin responded by highlighting two proposals being discussed by the community that would require ETH to be used at the protocol level, such that gas would be paid in ETH.

Ethereum also may be under pressure following last week’s announcement that an ETH futures contract is due to be launched by the CBOE. As the Bitcoin price slid following the launch of CME and CBOE futures contracts back in December, many are suggesting Ethereum could suffer the same fate.

Bullish pronouncements being made for global future crypto holdings

Coinbase CEO Brian Armstrong predicted on Saturday that 1 billion people will be involved in the cryptocurrency ecosystem within the next five years. Speaking at TechCrunch Disrupt, Armstrong expects strong crypto growth in the next few years, with global interest and involvement in crypto growing from 40 million people today to a staggering 1 billion people. And he thinks Coinbase to play a hugely influential role in that growth, as he expects his exchange to become something akin to the New York Stock Exchange in the near future. But it will only work if new companies out there continue to create their own tokens, “Every open source project, every charity, potentially every fund or these new types of decentralized organizations [and] apps, they’re all going to have their own tokens.”

Perhaps Armstrong is right – a separate study carried out by the Investment platform SharesPost found that the majority of crypto users and retail investors are planning on increasing their holdings of digital assets during the next 12 months. 2,490 retail investors and 528 individual accredited and institutional investors were surveyed in July, and according to SharesPost, “Despite the 60 percent decline in cryptocurrency valuations this year, consumers and investors continue to offer a bullish, long term outlook for crypto and Blockchain.” The survey also found that 70% of respondents are holding less than $100,000 worth of crypto in their portfolios, while almost the same proportion indicated a desire to earn more than $100,000 per year.

A Coinbase ETF coming soon?


Coinbase was also in the news after reports emerged it is in talks with Blackrock about a Bitcoin exchange-traded fund. According to Business Insider, Coinbase is already in the process of setting up the ETF with the help of the world’s biggest asset manager (with over $6 trillion AUM), due to its vast experience in the ETF market. It not known how long talks have been ongoing, but the report states that BlackRock has not yet presented any recommendations to Coinbase.

The news follows earlier announcements by Coinbase that it would launch a cryptocurrency index fund for accredited investors with a net worth of “at least $1 Million”.

Congress says crypto not favored by terrorists

A recent hearing by the US Congress Subcommittee on Terrorism and Illicit Finance asserted that crypto is not being used to finance terrorist activity as much as through traditional financial institutions. The hearing considered the major routes through which terrorists transfer funds, including financial institutions, semi-formal methods such as the hawala exchange system, and crypto. But while crypto has been used by the likes of al-Qaeda and the Islamic State, they have not had much success, according to Congress.

Yaya Fanusie, director of analysis for the Foundation for Defense of Democracies (FDD) Center on Sanctions and Illicit Finance, posited that the majority of terrorists, especially ones on “jihadist battlefields,” are operating in areas where crypto can’t be used, and as such, fiat currency still remains the preferred choice. He did warn, however, that U.S. government bodies focusing on terrorist financing should become more competent in analyzing cryptocurrency transactions, “By preparing now for terrorists’ increasing usage of cryptocurrencies, the U.S. can limit the ability to turn digital currency markets into a sanctuary for illicit finance.”

EU officials voice opinions on regulation for cryptos and ICOs


EU finance ministers gathered in Vienna last week, agreeing that they won’t rush to impose further regulation on crypto markets. Instead, they will wait for the conclusions reached by the analysis conducted by European authorities, before taking the next steps. They also underlined the earlier view put forward by the Financial Stability Board that cryptocurrencies don’t threaten the financial system. The meeting itself was intended to ensure EU regulators are aligned on whether crypto regulation is needed. Olaf Scholz, Germany’s Finance Minister, noted it ensured policymakers are “put in a position in which they’re able to act.” And Ireland’s equivalent Paschal Donohoe assured that “the EU will be acting carefully in this area.”

Meanwhile, EU lawmaker Ashley Fox separately stated that new regulations for ICOs are fundamental in making them more “accessible” within the regional bloc. Fox held a meeting on Tuesday to discuss proposed regulations for ICOs and especially the people and businesses that conduct them. The member of European Parliament’s proposal would limit the ICO proceeds to €8 million euros, mandate know-your-customer/anti-money laundering rules, and provide token startups with access to the entire EU. “What I’m aiming to do is bring transparency to ICOs, allowing intermediaries to perform the required due diligence. And the effect of this will be to provide an EU-wide law which gives a passport to the whole market.”

Dr Justin Chan Dr Chan founded DataDrivenInvestor.com (DDI) and is the CEO for JCube Capital Partners. Specialized in strategy development, alternative data analytics and behavioral finance, Dr Chan also has extensive experience in investment management and financial services industries. Prior to forming JCube and DDI, Dr Chan served in the capacity of strategy development in multiple hedge funds, fintech companies, and also served as a senior quantitative strategist at GMO. A published author at professional journals in finance, Dr. Chan holds a Ph.D. degree in finance from UCLA.

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