DDI Crypto Newsletter | Week of August 26 | With Alpha Trades
We’re In For a Wild Ride
It’s a prolonged Alt Season, as in everyone’s looking for an alternative to Dollars and stonks. Banks, governments, and friends are talking about crypto-assets and DeFi. Portnoy got rekked, but will he save Bitcoin from this pullback? Oof, spoke too soon.
The thing is, “down” may be canceled for stonks tomorrow, when Powell lifts the ceiling on inflation. The Fed isn’t even thinking of thinking about “down.” We’re in an “up” shaped economy, Corona-who?
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In The News
The state of Bitcoin (click the links to see charts): According to Glassnode, Bitcoin addresses with balances over 1,000 Bitcoin reached a record high, signifying accumulation. Another long-term bullish sign is the circulating supply of BTC that hasn’t moved in at least two years is at 44%, higher than it’s been in three years.
The last time crypto-asset exchanges experienced a progressive decline in BTC holdings was before 2017’s crypto bull run.
The company will provide crypto-based interest accounts and loans, with zero-fee trading. It’s also developing a Bitcoin rewards-based credit card. Anthony Pompliano, a famous podcaster in the space, joined BlockFi’s board of directors.
The ETH 2.0 testnet experienced a series of misfortunes soon after coming online.
The latest moonshot: Aave, a decentralized finance (DeFi) dapp on the Ethereum blockchain, is now first place in the DeFi space for total value locked into a project at $1.45 billion, higher than its rival, MakerDAO. (Yahoo! Finance)
Aave’s run-up may be a tailwind of the project receiving an Electronic Money Institution (EMI) license by the UK Financial Conduct Authority (FCA). The authorization allows Aave to issue digital cash alternatives and provide payment services. (The Block)
We’re mid-bubble: And if you don’t think we’ve been in an “alt season” for a while now, perhaps you haven’t been following the hilarity that is Dave Portnoy, founder of Barstool Sports.
Within a single week of meeting with the Winklevoss twins to invest a pile of cash into Bitcoin and a basket of “shitcoins,” Mr. Portnoy tapped out with a massive loss. After claiming he was out of the game entirely, maybe for good, he’s already suggesting he may “save Bitcoin” after all. (Decrypt)
The Fed isn’t satisfied: Not to mention, the IRS has put a query about crypto transactions on page 1 of the 2020 tax return. If anything, that’s a signal of the government taking crypto regulation ever more seriously.
The bigger picture: As regulators turn to DeFi and scrutinize and legitimize crypto-assets in general, there’s bound to be a regulatory crackdown in due time. Now that US banks can legally offer crypto-asset custodial services, financial outfits can’t afford to be unlicensed. Not if they plan to keep up with competition and regulation.
Sad anarchists look elsewhere
Ontario’s out: Crypto-asset Derivatives Exchange BitMEX closed the door on Ontario-based Traders. Why? Well, the reason’s unclear. BitMEX said the decision was “mandated” by the Ontario Securities Commission. The company already blocks US and Hong Kong-based traders. (Coindesk)
Florida’s cool with it: Binance.US takes the Sunshine State off its “no-fly” list, inviting 12 million eligible traders to the market. OrangeCoin, anyone? Come on, you know it’ll moon. (Coindesk)
Dirty laundry: A recent study highlighted how up to 98% of trading activity on some of the most popular crypto-asset exchanges might be fake. The researchers are asking CoinMarketCap and CoinGecko to highlight wash trading in their public data.
The EU Commission is developing a legal framework for crypto-assets for as early as Autumn. The proposed framework suggests there be a “sandbox” to serve as a legal testing ground and develop a unified European market for crypto-assets.
Sweden prefers plastic and bits: The Bank for International Settlements (BIS) published a report about the development of CBDCs worldwide, and Sweden is in the lead for scrapping physical cash. (Decrypt)
China is trialing digital currency and electronic payments in Beijing, Tianjin, Hong Kong, Macau, and other regions.
Complaints on the blockchain: Beijing has also partnered with Huawei to develop a blockchain governance platform. The project initially aims to improve municipal responses to virus outbreaks and make it easier for citizens to appeal city rulings and check for road and utility issues.
Ambitious plans: While details around the official launch date for the digital Yuan isn’t official yet, there’s a chance the Party will use it during the 2022 Winter Olympic Games in Beijing. (CoinTelegraph)
Long ways to go yet: Chinese officials dispelled rumors that China was already using the digital Yuan for large-scale transactions, such as real estate purchases. The country is still very much in the low-capital, alpha phase of testing.
Capital flight: A report by Chainalysis shows in the past 12 months, over $50 billion worth of crypto-assets has left China. (CoinTelegraph)
Beijing banned direct Yuan conversions into crypto-assets in 2017, sparking the rise of stablecoin Tether as an alternative to fiat. Also, Beijing prevents citizens from moving more than $50,000 out of the country each year.
This news should stoke some flames: The Apple Daily, one of the largest independent newspapers in Hong Kong, published a front-page ad promoting Bitcoin. The headline stated, “Banks, today you’re not ditching me, I’m ditching you.” Two weeks ago, Jimmy Lai, the paper’s CEO, was arrested under National Security Law.
Takeaway: This prior regulation, coupled with rising US-China tensions and the development of a Chinese CBDC, all contribute to the rise of stablecoins like Tether in the region as a conduit for the capital flight.
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In other news
This one’s pretty darn important: Federal Reserve Chairman Jerome Powell will deliver a speech tomorrow, which will change how the Fed views inflation. Rumors are this speech will focus on increasing inflation for the sake of a better economic environment.
In this write-up, Anthony Pompliano explains why inflation will not work out well for the bottom 50% of Americans.
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