The Weekly Hash – September 23-27

This digest is prepared for informative purposes only and does not represent an investment recommendation or investment advice. Please see our full disclaimer at the bottom for more information.

See below all the important happenings this week in the world of crypto, presented by the experts at Kraken: 

  1. Spiegel: Facebook Reveals Libra Stablecoin Basket Breakdown, Acquires Chatbot Maker for Calibra Wallet
    • Facebook (FB) revealed the percentage breakdown of the basket of global currencies that will underpin Libra in a letter to Fabio De Masi, a German legislator and former member of the European Parliament
    • The basket will consist of USD, EUR, JPY, GBP, and SGD, with 50%, 18%, 14%, 11%, and 7%, respectively
    • TechCrunch reported that FB acquired AI-based chatbot startup Servicefriend to build a customer service messaging bot for its Calibra wallet
    • Link to CoinDesk’s report on Libra breakdown
    • Link to Cointelegraph’s report on Servicefriend
  2. Blockchain Transparency Institute: BTI Market Surveillance Report – Sept. 2019
    • The Blockchain Transparency Institute’s (BTI) September market surveillance report, which verifies accurate reporting of crypto exchange volumes, states, “Since the start of 2019, global wash trading has reduced by 35.7% among the real Top-40 exchanges. The process of sharing our data reports with many of these exchanges has resulted in enhanced mechanisms for detecting wash trading accounts and shutting them down”
    • The cleanest exchanges since its latest report continue to be Kraken, Coinbase, Poloniex, and Upbit, while OKEx and Bibox are the exchanges with the most wash trading; fake volumes of these exchanges exceed 75%, but their real volumes (i.e., not including wash trades) still place them in the Top-20 consistently
    • Japan and the U.S. lead the world in exchanges with accurate volume reporting, “This can be due to several factors, the main of which is the legal and regulatory standards in these countries. However, stricter regulatory frameworks do not always produce the cleanest exchanges”
    • Over the past 90 days, the top stablecoin remains USDT with 94% of all real stablecoin volume, while USDC’s real volume has moved into 2nd place and is currently the fastest growing stablecoin this year along with the lowest global wash trading value at just <7%; global wash trading value for TUSD is ~12% and 13.7% for PAX
    • USDT has the highest global wash trading value at 67.3% with DAI in second at 30.2%
  3. Wilsons Auctions: £500k of BTC Seized From UK Criminal to be Auctioned With No Reserve
    • The Eastern Region Spec Ops appointed Wilsons Auctions to manage a no-reserve (i.e., no minimum price) auction worth £500,000 (~$621,000) of crypto, including BTC, ETH and XRP, among others, that was seized from a UK criminal who “illegally supplied online personal data and hacking services in exchange for thousands of pounds worth of cryptocurrency”
    • The int’l auction will start on Sept. 25th, with the crypto divided into lots: BTC will be sold in 0.25 to 2 BTC lots, while the other cryptos will be offered in larger lots, “A further 15 Lots of bitcoin will be included in the Unreserved Government Auction which will take place at 6 pm GMT on Thursday 26th September and will be available to both online and physical bidders”
  4. Global Times: China’s Digital Currency Not to Come as Early as Speculated
    • Refuting media reports of launching a national digital currency as early as November 11th, the People’s Bank of China (PBoC) said rumors regarding launch time and participating institutions that circulated since the end of August are “inaccurate speculations”
    • The digital yuan will be issued to China’s four biggest commercial banks, Alibaba, Tencent and UnionPay in the initial stage, and will differ from crypto like BTC in that its tech is a centralized “legal digital currency” to be financially backed by the gov’t
    • The PBoC said it will release a progress statement in due time, asking the public to rely on official statements for info
  5. Kik Founder Ted Livingston: Moving Forward Boldly with Kin
    • Kik’s Founder Ted Livingston alleged that the SEC’s “manipulative” tactics to frame Kik’s KIN ICO as a security in their ongoing lawsuit has drawn out a long and expensive process that has drained their resources, “Instead of selling some of our Kin into the limited liquidity that exists today, we made the decision to focus our current resources on the few things that matter most”
    • The firm will shut down the Kik app, reduce its headcount to 19 employees, and focus on converting Kin users into Kin buyers, “Together these changes will drop our burn rate by eighty five percent, putting us in position to get through the SEC trial with the resources we have […] But no matter what happens to Kik, Kin is here to stay”
    • In order to achieve Kik’s sole goal of having millions of people purchase Kin organically (i.e., without a crypto exchange), Kik will execute a three part strategy: move the Kin blockchain forward to support 1B consumers making 12 txs/day with sub 1 second confirmation times, accelerate the adoption, growth, and success of all developers in the Kin Ecosystem, and build a mobile wallet that makes it easy to buy Kin, exciting to use Kin, and seamless to explore the Kin Ecosystem
    • Just yesterday, Calcalist reported that Kik sent layoff notices to 70 employees of its subsidiary Kin, though some “will be offered the option of transferring to a new company that is based on the same technology”
  6. EasyWallet: 25,000 Major Retail Stores in France to Accept BTC in 2020
    • By early 2020, support for BTC payments will be launched at +25,000 points of sale (POS) for 30 French retailers, including Decathlon, Sephora, Boulanger, Foot Locker, World House, Intersport, Cultura, Maisons du Monde and Norauto
    • The payments system is launching via a partnership between POS tech provider Global POS, the EasyWallet application and payments platform Easy2Play
    • Payments will be made in BTC, but funds will be automatically converted into EUR at sale
    • Conversion services will be provided by two partners, Deskoin and Savitar, both of whom are currently applying for Digital Asset Service Provider accreditations under France’s PACTE Act
    • Link to Cointelegraph’s report
  7. Kraken: LINK and DAI Trading Starts Tomorrow
    • Kraken will list Chainlink (LINK) & Dai (DAI) for trading tomorrow, Sept. 25th; both cryptoassets will have pairs with USD, EUR, BTC, and ETH
    • Deposits and withdrawals are expected to begin at ~13:30 UTC and the first trades will start shortly after funding is enabled since sell orders can’t be placed until deposits clear (~6 minutes for both LINK & DAI at 30 confirmations)
    • LINK & DAI will be available for trading on Kraken, Kraken Pro, and OTC, but will initially be unavailable for Kraken Futures and margin trading
    • Chainlink is an ERC20 token that connects decentralized P2P networks and smart contracts to real-world data, events, and payments, and Dai is an ERC20 stablecoin that serves as a hedge against crypto volatility, provides immediate liquidity to crypto holders, and can be used to purchase goods and services
  8. SEC: SEC Delays Decision on NYSE/Wilshire Phoenix BTC ETF Proposal
    • The SEC has begun evaluating the proposed rule change to allow NYSE Arca to list and trade shares of Wilshire Phoenix’s BTC and Treasury Investment Trust, an ETF that would give investors exposure to both BTC and U.S. Treasury bonds
    • The regulator legally mandated 35 days from today to make a decision (i.e., until Oct. 29th)
  9. CoinDesk: For Desperate Mt Gox Victims, Long-Shot Bitcoin Deal Beats Endless Wait
    • A minority of Mt. Gox creditors whose holdings make up a combined 15,000 BTC (~$1.25B) took an offer by Russian law firm ZP Legal, which claimed it could recover up to 200,000 BTC (~$1.7B) from unnamed Russian nationals, because they decided it’s better to take a chance on ZP Legal than wait for Nobuaki Kobayashi, Mt. Gox’s court-appointed trustee in Japan, to finish the corporate restructuring process
    • The majority of creditors are looking for alternatives since they questioned the firm’s motives and extraordinarily high fees of 50-75% of the recovered funds, depending on how much each creditor gets, plus $320 per hour, charged only in the case of success
    • It’s unclear if Kobayashi will work with ZP Legal, but creditors hope to hear the answer during the next meeting on Oct. 1st
    • ZP Legal’s efforts could result in the extradition to Russia of Alexander Vinnik, the alleged operator of defunct exchange BTC-e, who’s also wanted in the U.S. for Mt. Gox-related charges
  10. The Block: CoinDesk Editor-in-Chief Pete Rizzo Departs After 6 Years
    • CoinDesk Editor-in-Chief Pete Rizzo left the publication following the announcement that CoinDesk was moving into the same building with its parent company, Digital Currency Group (DCG)
    • The move was initially opposed by many CoinDesk employees, including Rizzo, who were worried that being in the same office with DCG would damage the publication’s reputation and deteriorate reader trust
    • CoinDesk’s editorial team will be temporarily helmed by Managing Editor Marc Hochstein, while CoinDesk Advisor Michael Casey will become the Chief Content Officer 
  11. Bloomberg: Venezuela Has Bitcoin Stash and Doesn’t Know What to Do With It
    • Coming at the request of state-owned oil and natural gas company Petroleos de Venezuela SA (PDVSA), the Venezuelan central bank is running internal tests to determine whether it can add BTC & ETH to its int’l reserves, which is near a three-decade low at $7.9B
    • The central bank will use BTC & ETH received from PDVSA to pay the oil company’s suppliers, though it isn’t clear how PDVSA came to own Bitcoin and Ethereum or the value of their holdings
    • Due to U.S. sanctions, PDVSA has struggled to do business with its clients and suppliers as major banks have avoided opening business channels with the company
    • Link to The Block’s report
  12. The Block: Person Behind 40% of LN’s Capacity, ‘I Have No Doubt in Bitcoin and the Lightning Network’
    • Since its launch in early 2018, the Lightning Network (LN) has grown to 10,000 public nodes and has +36,000 channels with a total capacity of 828.9 BTC (~$6.6M); after increasing +3.17% increase in the past month, the number of public nodes is now at an all-time high (ATH)
    • Of the +36,000 channels, there are only 5,975 nodes with active channels
    • One of the largest contributors to this growth is LNBIG, an entity which makes up ~40% of the network’s capacity, “The sum of all local balances in channels in LNBIG network is 331.5 BTC. The total LN capacity is 832.2 BTC. But, I have 1,800 channels between my nodes and each channel with a capacity of 0.16. So LNBIG’s capacity is about 40% of the total capacity”
    • When asked what the biggest weakness of LN was, LNBIG responded, “The weakness is that few users are familiar with it. Take Bitcoin network users; every day about 300,000–350,000 transactions are made on the blockchain, and in the Lightning Network, about 1,000. If at least a small percentage of people who use bitcoin would transfer their transactions to the Lightning Network, they would instantly make my project profitable, for example […] Other problems concern node operators, but here they are not problems of mass adoption. The infrastructure of nodes already allows for orders of magnitude more payments than now. Moreover, for this, you can not increase the capacity because the funds are distilled from one end of the channel to the other, and this process does not consume bitcoins from node operators. It’s like a circulatory system, and the body is already full of blood. It only remains for him to live an active life”
    • When asked what features would attract more BTC users to LN, the entity singled out atomic multi-path payments, “For the widespread adoption of the Lightning Network, it is important to have software that integrates the wallet with accounting”
    • Stipulating the LN’s viability in the event that routing fees do not outperform lending rates, the individual said that it is too early to make money on the LN
    • Link to Cointelegraph’s report
  13. Nikkei: Facebook’s Zuckerberg Appears to Put Libra Launch Date in Doubt
    • In a recent interview, Facebook’s CEO Mark Zuckerberg was asked about its stated plans to launch Libra in 2020, in which the CEO sidestepped the question, “Obviously we want to move forward at some point soon [and] not have this take many years to roll out […] But right now I’m really focused on making sure that we do this well”
    • Until now the Libra project had appeared to have been sticking to its guns on the 2020 target, with Libra Association Managing Director and COO Bertrand Perez saying in September,  “We are firmly maintaining our launch schedule, between the end of the first half of the year and the end of 2020”
    • Zuckerberg added that FB is now taking a more cautious approach when bringing forward projects like Libra that are ” very sensitive for society,” allowing a period for consultation and “working through the issues […] That’s a very different approach than what we might have taken five years ago”
  14. Kryptografen: Are Institutional Investors Manipulating BTC’s Price?
    • According to Arcane Research’s findings from Jan. 2018 to Aug. 2019, 75% of the times immediately before CME issued payouts for its BTC futures, the price of BTC fell by an average -2.27%
    • Serving as an anecdote, BTC recently nosedived ~15% to ~$8,000, just days before a major settlement date on Friday, Sept. 30th
    • Kryptografen concluded, “The figures thus support a hypothesis that the bitcoin price is manipulated in advance of CME settlement […] However, the figures do not say anything about ‘deliberate manipulation’ or, for example, only a result of investors’ strategy of hedging”
  15. CoinDesk: Lightning Sucks, But It Could Help Build a Bitcoin Economy
    • While LN co-creator and Lightning Labs co-founder Tadge Dryja claims that “profit is a bug” within the LN, nearly a dozen LN-related firms are pushing toward monetization
    • Dryja stopped working on the LN last year because he felt the current development process, spearheaded by Lightning Labs and Blockstream, diverged from his vision for the BTC scaling solution; from his perspective, micropayments can’t scale in a secure way, yet some suggest the network could do this, rather than offering a cheaper way to do a few dollars worth of payments when network fees rise
    • Roy Sheinfeld, CEO of mobile wallet startup Breeze, plans for the startup to follow the ISP model, operating channel connectivity for users as a Lightning Service Provider (LSP) with the vision of building a “lightning economy” over the next five years, “I need to form a coalition, to bring more players and to bring more liquidity. You choose a provider, and you can choose multiple providers, so you can choose who you connect to […] I think we can make money by providing channels as a free service then provide premium services for more reliability, more capacity, stuff like that”
    • Dryja believes that providing fee routing services won’t be a profitable business model, even if adoption increases, and also worries that developers are focused on “cool, fancy features” without focusing on making a stable network that addresses user needs, “I totally understand. It’s way more fun to work on cool new cryptography than something boring […] But I worry the lightning network has been overpromised, like bitcoin”
    • Lightning Labs CTO Olaoluwa Osuntokun envisions a “closed economy” with users paying/receiving money through LN, especially payments like hourly wages
    • LN invoices generally expire after an hour, which requires the buyer and seller to coordinate and doesn’t offer simplified info about the tx itself for tax records, meaning premium services may need to include both channel and invoice management
  16. Fortune: NBA Star Spencer Dinwiddie on Why He’s ‘Tokenizing’ His Contract
    • NBA guard Spencer Dinwiddie partnered with Paxos to raise $13.5M by tokenizing the first year of his three-year, $34.5M contract on Ethereum, with a minimum buy-in of $150,000 from accredited investors only
    • Dubbed the DREAM Fan Shares platform, investors in the STO will earn interest through Dinwiddie’s bi-monthly paycheck in SD8 tokens (named for Dinwiddie’s initials and number)
    • The contract is fully guaranteed, meaning investors don’t risk losing their funds if he is unable to play; he is set to earn $16M this season, trading $2.5M in earnings for the certainty of an upfront payment
    • While the STO is only set for this first season, Dinwiddie will include an option for token holders to continue their investments through the second and third years of his current contract, “Essentially, you hold the token and it’s kind of a marker […] They all represent shares in the issuance so it’s not like ownership [of the player] or something like that, it’s contractual value”
    • Paxos will provide custody and escrow services for the project, paying token holders with PAX
    • The NBA player says the new platform is designed to help athletes and other individuals in the entertainment industry take advantage of their earnings, “Every asset class has its associated fixed-income products attached to it and when you look at the NBA, you look at the entertainment as a whole. These are brokers […] The brokers kind of determine the value of the assets, the assets are revenue-generating vehicles, which is us. … It’s not the value of our intellectual property, it’s us going out and playing every night … and helping the league out”
    • Link to CoinDesk’s report
  17. Izvestia: Russia Could Tax BTC and Other Crypto Mining as a Treasure
    • The Association of Banks of Russia put forth a proposal that would charge a treasure tax, a tariff on something that a person creates or finds (e.g., fruits or products), on crypto miners in the country
    • The association said that crypto mining can be equated to the finding of money or any other form of treasure, “Operations with virtual currencies should be taxed on profit as exchange transactions in the Tax Code”
    • The proposal is scheduled to be discussed on Oct. 8th
    • Link to The Block’s report
  18. AMB: Bitcoin Still Outperforming Most Well-Known Traditional Assets, Despite Being Down by 20%
    • BitVol.info’s 30-day BTC volatility index has been reducing constantly since July, with the reduction becoming prominent after it hit a temporary peak in mid-July 2019
    • The macro trend shows that cycles of peak volatility are followed by periods of low volatility and vice-versa, e.g., the last time volatility reached a low below 2% was in mid-March, which was followed by an explosion in volatility and concurrently, the price began going parabolic in April
    • Currently, the volatility might have a hit a probable bottom on Sept. 16th, days before BTC broke out of the biggest consolidation pattern of 2019, thus indicating a possible increase in volatility at least for the short term
    • Even with BTC recently down by -20%, the cryptoasset is still greatly outperforming traditional assets with current YTD returns of +118% (see figure below)
    • Notably, the Bitwise top 10 index, which tracks the top 10 cryptos by market cap, is also greatly outperforming traditional assets
  19. Reuters: China’s Fintech Stocks Buoyed by Beijing’s Digital Currency Push
    • Shares of China’s fintech companies are rising as the country prepares to launch its digital yuan, which would ostensible create demand for security and payment services
    • For reference, shares of electronic authentication services provider Beijing Certificate Authority hit a record high this month after having risen by ~200% this year, while China’s biggest network security services provider, 360 Security Technology Inc, shares increased by +50%
    • The China Securities Index Co.’s (CSI) Fintech Theme Index gained +50% so far in 2019, outperforming the broader market
    • Soochow Securities said, “We believe the PBOC would probably continue to use the current infrastructure of commercial banks, while the most important carrier of personal digital currency would be mobile phones”
  20. Ripple: Ripple’s Xpring Acquires Logos
    • Ripple acquired Logos Network, a DLT-based payment platform that focuses on speed and scalability, to work with Xpring in developing DeFi products that will leverage XRP at its core 
    • Logos’s founder and CEO Michael Zochowski will lead DeFi Products, as well as build relationships, “We expect that our team will work on a variety of projects at all levels of the Xpring platform, with a particular focus on enabling a wide range of DeFi applications. We continue to strongly believe that the future of payments and finance lies in blockchain and decentralization”

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