+ the only remaining regulatory question mark
This was a big week for Bitcoin, when the world’s largest asset manager, BlackRock, indicated that two of its funds may invest in bitcoin futures. And Goldman Sachs may be looking to get into the custody game. These news bits are being shored up by on-chain movements, according to Willy Woo. Crypto, generally, also had a lot of positive news, with several Biden appointments being seen as positive for crypto, with friendly and knowledgeable regulators likely to helm the SEC, CFTC and OCC. Even Treasury Secretary nominee Janet Yellen had a more nuanced view of cryptocurrencies than initial reports indicated. Meanwhile, ETH flirted with its previous all-time high before slumping again, and after initial reports of a double-spend on Bitcoin, a careful analysis debunked the notion.
On Unchained this week, two crypto lawyers dig into the SEC’s case against Ripple, while on Unconfirmed, an executive at Tether’s bank, Deltec, explains why the Crypto Anonymous post about Tether last weekend was, as he called it, “FUD.”
This Week’s Crypto News…
If there was ever a sign that Bitcoin is drawing the institutional crowd, it came Wednesday, when news broke that BlackRock, the world’s largest asset manager, which has nearly $8 trillion under management, had made two filings with the Securities and Exchange Commission that two of its funds could invest in bitcoin futures. The filings, for BlackRock Funds V and BlackRock Global Allocation Fund, mentioned illiquidity as a potential risk, “as bitcoin futures are not as heavily traded as other futures given that the bitcoin futures market is relatively new.” It also noted that the Funds would only invest in “cash-settled bitcoin futures traded on commodity exchanges registered with the CFTC.” Which, basically, at this point in time, means CME.
On a related note, Goldman Sachs is exploring digital asset custody, issuing a request for information to at least one crypto custody company at the end of 2020.
Meanwhile, on-chain analyst Willy Woo is seeing more whales buying up the recent dip in the Bitcoin price, with holders of 1,000 BTC sharply increasing, and coins moving off exchanges to wallets that accumulate but don’t sell.
And finally, if you’re wondering how well bitcoin businesses have been doing amidst this frenzy, look no further than Silvergate Bank, which saw nearly $3 billion in deposits in the fourth quarter of 2020 — all from digital currency customers, including crypto exchanges like Coinbase, Kraken (disclosure, a previous sponsor of my shows), Bitstamp and others.
Several appointments by President Joe Biden have crypto people feeling positive about what the industry can expect from this administration. The new head of the SEC will be Gary Gensler, replacing the notoriously anti-crypto Jay Clayton. Gensler, formerly the chairman of the Commodity Futures Exchange Commission, is familiar with blockchain technology, having taught about digital currencies at MIT’s Sloan School of Management. In an opinion piece for CoinDesk, Jeff Bandman, a former CFTC official, said he expected Gensler would bring more clarity to market structure and infrastructure for crypto assets to “promote adoption and investor confidence,” adding “I would be shocked if there are not things that make the industry howl.” He also said he expected that the SEC would finally approve a Bitcoin ETF. Bandman also raises an interesting question: whether Gensler will seek a mandate from Congress for the SEC to regulate the spot market for crypto assets that are not securities, noting that the CFTC only has enforcement authority, which isn’t the same as regulatory or supervisory authority.
Georgetown professor Chris Brummer is Biden’s likely nominee for CFTC chair, after the crypto-friendly chair Heath Tarbert stepped down Thursday. (Tarbert will remain a commissioner.) Brummer has recently been researching cryptocurrencies, and in recent years has testified about them as well as central bank digital currencies to the CFTC.
Former Ripple board member Michael Barr will likely replace Brian Brooks as the Comptroller of the Currency, according to the Wall Street Journal. Barr is a former Treasury Department official currently serving as dean of public policy at the University of Michigan.
In her Senate confirmation hearing, Treasury Secretary nominee Janet Yellen called cryptocurrencies a “particular concern” when it comes to terrorist financing, noting that the government should be sure its technology keeps up with that of the terrorists’. She said, “I think many [cryptocurrencies] are used, at least in transactions sense, mainly for illicit financing.” However, in written testimony, she acknowledged the benefits of cryptocurrencies as well as “the potential they have to improve the efficiency of the financial system.”
Meanwhile, the same day, Chainalysis published the first portion of its 2021 Crypto Crime Report, which found, “cryptocurrency-related crime fell significantly in 2020” — from 2.1% of all transaction volume in 2019, adding up to $21 billion worth, to 0.34% in 2020, which is $10 billion in transaction volume. Scams made up the majority of all crypto-related crime, accounting for 54%. Meanwhile, ransomware, although it only accounted for 7% of all funds received by criminal addresses, tripled in the work-from-home world spurred on by the pandemic.
In a long analysis piece, Nikhilesh De of CoinDesk went through how appointments at several agencies would affect crypto, noting that the controversial proposed FinCEN rules that were being pushed by former Treasury Secretary Steve Mnuchin have now had their comment periods extended. However, he noticed, one part of the rule only gets 15 more days, while another one about record-keeping on counterparties will receive a 45-day extension because of its complexity.
The price of ether hit a new all-time high earlier this week, surpassing $1,420, though by press time, the price had fallen again to $1,100.
On Wednesday, BitMEX research tweeted that there was a small double spend of 0.0006 BTC, which was about $21. However, as Hasu of Deribit explained in a blog post, instead of this being the equivalent of someone bouncing a check in bitcoin, it was more that a transaction was invalidated. But based on the fact that almost an entire day passed between the initial transaction and the first transaction attempting to replace it, it seems unlikely that it was someone trying to cheat a merchant who offers purchases with zero confirmations. Instead, what seems likely is that this spender, who Hasu calls Alice, actually made an additional transaction that assumed her previous transaction with the too-low fee had already passed, and this time, the fee she used was enough to pay for both transactions, so it went through.
You’ve probably seen Maren Altman’s TikTok videos, in which she uses astrology to make crypto price predictions. She correctly called the January 11th drawdown on Bitcoin and, in this Reuters video, she explains that she’s “not an oracle. I’m just somebody who studies patterns.” Altman, who dollar cost averages her crypto purchases, says, “Astrology can be thought of like a giant mirror or a symbolic language, where certain signifiers of planetary alignments are archetypes and they represent themes in the world like growth or restriction or aggression or peace.” So when she looks at how the movement of the planets aligns with Bitcoin for the next few months, she says February and early March are favorable, then there will be a big price correction, but that May will be bullish.