 February 23, 2021  The top stories in bitcoin, crypto and more – all in one place, delivered daily. Sponsored By:  By Daniel Kuhn If you were forwarded this newsletter and would like to receive it, sign up here.
Sound bites  Paxos CEO Charles Cascarilla thinks the kinks in crypto's plumbing are being worked out, which could prefigure a much larger wave of institutions entering the crypto economy.
"I don't think anyone would have expected that corporate treasuries would be buying bitcoin," he said. But here we are.
Watch the full interview here.
Market intel Bitcoin traded within an unprecedented $11,000 range Monday dropping from a lifetime high of $58,000 set over the weekend to below $47,000. This marks the leading cryptocurrency's first five-figure daily price range, CoinDesk's Zack Voell reports. A surge in bitcoin balances on major cryptocurrency exchanges preceded Monday's sell-off, Muyao Shen noted, adding that this could prefigure further drops. Some 40,000 BTC ($2.1 billion worth) moved to exchanges between Friday and Monday.
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Top shelf
An army of Ethereum bots has "extracted" at least $107 million in cryptocurrency over the past month, according to new research. These Miner Extracted Value (MEV) bots find arbitrage opportunities in Ethereum's mempool, sometimes by copying profitable trades waiting to be settled and increasing the gas price to beat the original to profit, according to CoinDesk tech reporter Will Foxley. While this could suck for individual traders, it also adds bloat to the network and likely contributes to Ethereum's skyhigh gas prices.
- One arbitrage scenario occurred on Kraken yesterday, with the price of ETH dropping as low as $700 (down from $1,628.82), for a narrow band of time. It's unknown what caused this "flash crash," though some signs point to a fat-finger mistake, CoinDesk's Muyao Shen reported. Though Kraken CEO Jesse Powell suggested an ether whale might have "decided to dump his life savings."
- A record-high $115 million in decentralized finance (DeFi) lending positions were wiped out Tuesday after the price of ether continued to correct to as low as $1,406 on Tuesday.
Crypto infrastructure is working out its kinks. Koine, a crypto custody and settlements layer provider, is insolvent, CoinDesk's Ian Allison reports. The London-based firm was short on cash as it attempted to build out an ambitious tech stack that could serve clients as diverse as Bitfinex and brokerage GCEX. "[T]he coming wave of [institutional crypto] interest is breaking too late for Koine," Allison notes.
- But blockchain infrastructure as a service isn't DOA. BNY Mellon, for instance, tapped Fireblocks as part of the banking giant's coming crypto business.
MoneyGram is stepping back from its partnership with Ripple Labs citing the legal uncertainty around the blockchain startup's XRP token. MoneyGram "is not planning for any benefit from Ripple market development fees in the first quarter" of 2021, usually a reliable source of income for the remittance firm, which brought in some $61.5 million.
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Introducing "Money Reimagined," exploring the future of money on CoinDesk TV
From the world leader in crypto news and events, the all-new CoinDesk TV covers the rapidly evolving world of digital finance and its role in the global economy.
CoinDesk's Money Reimagined, a newsletter and podcast series, expands into television with the same critical look at the issues and people that are influencing the future of money and economics as we know it. The TV series is a video production of the eponymous weekly podcast hosted by CoinDesk's Chief Content Officer Michael Casey and The World Economic Forum's Sheila Warren.
Watch "Money Reimagined" Saturdays at 12 p.m. ET on YouTube or CoinDesk.com.
At stake
Clarity and uncertainty
The New York Attorney General's (NYAG) multi-year investigation into the twinned exchange and stablecoin issuer Bitfinex and Tether's internal finances has wrapped, with the regulator bringing no formal charges. The firms will pay $18.5 million to settle a suit centered on claims that the U.S. dollar stablecoin was not fully-backed, but have admitted no wrongdoing.
Tether (USDT) is the largest stablecoin in the crypto economy. In the past year it has grown from $2 billion to $34 billion, and serves a systemically important role for traders, exchanges and virtually all aspects of this emerging financial sector. Since tether's inception, there have been unanswered questions as to whether this synthetic asset was fully backed by reserves held in a bank account, which Tether claimed.
"Tether's claims that its virtual currency was fully backed by U.S. dollars at all times was a lie," Attorney General Letitia James said. According to court documents, Bitfinex and Tether "recklessly and unlawfully covered-up massive financial losses," "obscured the true risk investors faced," "were operated by unlicensed and unregulated individuals" and, at one point, lacked a bank account.
Despite proving these strong accusations true, Tether looks to have gotten off fairly easy. In addition to the aforementioned fine, the firm will provide regular reports on Tether's reserves for the next two years. The firm is also barred from operating in New York State.
This increased level of transparency is viewed positively by industry commentators. Castle Island Ventures partner and CoinDesk columnist Nic Carter said this was a historic "derisking event" for the industry. According to Carter, one of the largest hurdles for institutions to enter the market was the lack of certainty around USDT, despite its outsized role.
For instance, JPMorgan analysts said just last week a loss of faith in tether could cause a liquidity crisis in crypto. In addition to questions about USDT's backing, there have been persistent conspiracies that tether is used to inflate the price of bitcoin.
"I think we can put that to bed now," Charles Cascarilla, CEO and co-founder of Paxos, said on CoinDesk TV Tuesday morning.
There are still questions about the form these quarterly reports will take, and the level of insight they may provide. "[T]he mandatory reporting and transparency requirements are better, although it will depend on the quality and nature of those reports and disclosures, including whether they are independently audited, etc," Elizabeth Renieris, founder of hackylawyER and technology expert, said in an email.
"Obviously the parties cannot be trusted to tell the truth," she continued. Though the issue is larger than just Tether: "Until some of the other measures around mandatory reporting and transparency requirements become institutionalized and standardized for stablecoins in general, it won't mean much," Renieris said.
One of the most vocal and consistent Tether critics, who goes by the pseudonym Cas Piancey, notes these developments are a "positive thing for Tether, and likely the space as well."
"I'll continue [researching and writing on Tether] because there's still loose ends to tie up in regard to the ongoing CFTC/DOJ actions, but if they start getting regular attestations and being properly regulated then no need to push for that," he added in a direct message regarding the Commodity Futures Trading Commission and the U.S. Department of Justice.
Indeed, as Cascarilla said, "In the case of Tether, it's still unregulated, unaudited and ... that will always create concerns. That doesn't mean tether is a source of systemic risk."
Quick bites
Regulatory updates
- 'India's Warren Buffett,' Rakesh Jhunjhunwala, Backs Bitcoin Ban (CoinDesk)
- The European Central Bank (ECB) wants veto power over stablecoins like libra. (CoinDesk)
- Nigeria's Crypto Ban Fuels Mistrust in Government (CoinDesk Opinion)
- What Janet Yellen Gets Wrong About Bitcoin (Decrypt)
Capital flows
- State Bank of India (SBI) is joining JPMorgan's blockchain payments network. (CoinDesk)
- Bitcoin payments platform for social networks Bottlepay raised £11 million. (CoinDesk)
- Nasdaq-listed bitcoin mining company Bit Digital partnered with Compute North, Core Scientific and others for a North American expansion. (CoinDesk)
- Uncovering Coinbase's $100 billion pre-market valuation. (CoinDesk Opinion)
- Galaxy Digital Leads $4.3 Million SAFT Into Blockchain Platform Centrifuge (Decrypt)
- "Rich Getting Richer in PoS Chains:" by Chainflow's Chris Remus (The Defiant)
- What Happens When Cryptocurrencies Earn Interest? (HBR)
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Sperax launches mobile app Sperax Play to connect everyone with modern money
Sperax Play is a mobile app whose initial utility is a decentralized crypto wallet where users have full control over their accounts. Ultimately, Play will grow into a community hub for Speraxians, crypto enthusiasts, and everyone interested in decentralization.
Mine, add, earn, play.
Sperax Play makes crypto easier than you think.
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Who won Crypto Twitter?
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